You are thinking of adding one of two investments to your already well-diversified portfolio. Security A Security B Expected return = 12% Expected return = 12% Standard deviation of returns = 11.0% Standard deviation of returns = 20.1% Beta = 2.0 Beta = 0.9 If you are a very risk-averse investor, which security is the better choice? (1) a. Security A. b. Security B. c. Either security would be acceptable. d. Cannot be determined with the information given.

You are thinking of adding one of two investments to your already well-diversified portfolio.

Security A                                            Security B
Expected return = 12%                          Expected return = 12%
Standard deviation of returns = 11.0%   Standard deviation of returns = 20.1%
Beta = 2.0                                             Beta = 0.9

If you are a very risk-averse investor, which security is the better choice? (1)

a. Security A.
b. Security B.
c. Either security would be acceptable.
d. Cannot be determined with the information given.

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