We can conclude from the above information that any rational, risk-averse investor would be better off adding Security AA to a w
1 answer:
Answer: False
Explanation:
First calculate the expected value for both securities:
Security AA:
= (0.2 * 30%) + (0.6 * 10%) + (0.2 * -5%)
= 6% + 6% + (-1%)
= 11%
Security BB
= (0.2 * -10%) + (0.6 * 5%) + (0.2 * 50%)
= -2% + 3% + 10%
= 11%
<em>They both have the same expected return so the investor will be indifferent. Statement is therefore false.</em>
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