You Are Thinking of Adding One of Two Investments to an Already

question 28

Multiple Choice

You are thinking of adding one of two investments to an already well diversified portfolio. Security A Security B
Expected return = 12% Expected return = 12%
Standard deviation of returns = 20.9% Standard deviation of returns = 10.1%
Beta = .8 Beta = 2
If you are a risk-averse investor

• A) security A is the better choice.
• B) security B is the better choice.
• C) either security would be acceptable.
• D) cannot be determined with information given.

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