You must add one of two investments to an already well- diversified portfolio
Security A Security B
Expected Return = 14% Expected Return = 14%
Standard Deviation of Standard Deviation of
Returns = 15.8% Returns = 19.7%
Beta = 1.8 Beta = 1.5
If you are a risk-averse investor, which one is the better choice?
A) Security A
B) Security B
C) Either security would be acceptable.
D) Cannot be determined with information given
Answer: B) Security B
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