You must add one of two investments to an already well- diversified portfolio. If you are a risk-averse investor,which one is the better choice?
A)Security A
B)Security B
C)Either security would be acceptable.
D)cannot be determined with information given

Question

You must add one of two investments to an already well- diversified portfolio.  If you are a risk-averse investor,which one is the better choice?
A)Security A 
B)Security B 
C)Either security would be acceptable. 
D)cannot be determined with information given

Quizplus · Accepted Answer

Since the investor is risk-averse, it is better to choose the security with the lower risk. Security A has a lower standard deviation and a lower beta compared to Security B, which makes it less volatile and less risky. Therefore, Security A is the better choice for a risk-averse investor.

You Must Add One of Two Investments to an Already