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Suppose you are a money manager and are looking at the following two assets: Asset A with expected return of 9% and standard deviation of
Suppose you are a money manager and are looking at the following two assets: Asset A with expected return of 9% and standard deviation of 30% and Asset B with expected return of 15% and standard deviation of 20%. The risk-free rate is 3%. Without doing any calculation. If you have to invest all your money either in Asset A or Asset B (but not a portfolio of the two, nor the risk-free rate), which one would you pick? Why? How would the answer depend on your risk aversion?
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