Asset X has standard deviation of 0.25, Asset Y has standard deviation of 0.35, and the two have a correlation coefficient of 0.50.Asset O has a standard deviation of 0.35, Asset P has standard deviation of 0.25, and the two have a correlation coefficient of 0.60. All four assets have the same expected return.

If portfolio XY fund has 50% of its investment in X and the rest and Y, and portfolio OP fund has 50% of its investment and O and the rest in P, which portfolio should all risk-adverse investors prefer?

a.Investors should prefer XY fund.

b.Investors should prefer OP fund.

c. It depends on whether the investor is very risk adverse or only slightly risk-averse.

WHAT IS THE CORRECT ANSWER?