Jack and Diane, grew up in the heartland, have now been married for 20 years and would like to invest some money. Assume the risk free rate is 2% annually. They take a test that rates their individual risk preference. Jack is given a 5 and Diane a 2.

Expected return	Standard Deviation
6%	10%
8%	20%
12%	25%

1. Which investment can the couple agree on, that it is better than the risk free asset?

2. What is the optimal y (risky) for Jack?