14)

Two assets have the following expected returns and standard deviations when the risk-free rate is 5%:

Asset A E(r_A) = 10% _A = 20%

Asset B E(r_B) = 15% _B = 27%

An investor with a risk aversion of A = 3 would find that _________________ on a risk-return basis.

Multiple Choice

• only asset A is acceptable

• only asset B is acceptable

• neither asset A nor asset B is acceptable

• both asset A and asset B are acceptable