1 A risk-averse investor is considering two possible assets to be held on a standalone basis. The possible returns and related probabilities (i.e. the probability distributions) for each assets are as follows: ry Asset Y Prob 20% Asset X Prob 20% 20% 20% 20% 20% 100% 20% -2% 4% 11% 12% 14% ry -4% 2% 9% 12% 20% 20% 20% 20% 100% Considering both its return and relative risk, which asset is preferred? Why? Ans. Which asset? Why