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Security A offers an expected rate of return of 12% with a standard deviation of 18%, and security B offers an expected return of 6%
Security A offers an expected rate of return of 12% with a standard deviation of 18%, and security B offers an expected return of 6% with a standard deviation of 25%. Obviously, security B is inferior to security a with respect to both mean return and standard deviation. Assume investors are risk-averse, would anyone hold security B in a diversified portfolio?
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