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2 You are a risk-averse investor. Suppose two stocks had the following historical returns - Year 1 Year 2 Year 3 Year 4 Year 5

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2 You are a risk-averse investor. Suppose two stocks had the following historical returns - Year 1 Year 2 Year 3 Year 4 Year 5 Stock A 9% 8% 10% 1% 5% Stock B 5% 3% 1% 6% 4% Further suppose you have 3 investment options -a) hold only Stock A, b) hold only Stock B or c) hold a portfolio consisting of 50% of each stock. From a risk perspective only, which would you choose? Why? Ans. Stock A, stock B or the Portfolio? Why

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