Stock X and Y both offer an expected rate of return of 15. The standard deviation of Y is 20 percent and that of X is 25 percent. If an investor wishes to invest in one of the stocks, then the average investor would generally

Multiple Choice

• prefer Y to X.

• The investor would generally be indifferent because of the expected returns are the same.

• The answer cannot be determined without knowing investors' risk preferences.

• prefer X to Y.