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gasset a has an expected return of 20% and return volatility of 15%. asset b has an expected return of 15% and return volatility of 12%. the risk free asset has a return of 5%. a risk-averse investor would prefer a portfolio using the risk-free asset and .

Sagot :

a risk-averse investor would prefer a portfolio using the risk-free asset and and asset B since asset B has higher sharper ratio.

Stocks, options, and futures are examples of somewhat higher risk investments that risk averse investors tend to steer clear of. They prefer to remain with assets that have low to no risk and guaranteed returns. Examples of these investments are Treasury bills and bonds issued by the government. A risk-free asset is one that has a guaranteed future return and almost no chance of declining in value or losing all of its value. Since risk-free investments don't need investors to be compensated for taking a hazard, they typically offer poor rates of return.

Learn more about risk averse here:

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