Question: Question 2 (8 marks) Consider two assets A and B. Asset A offers an expected rate of return of 12% with a standard deviation of

Question 2 (8 marks) Consider two assets A and B. Asset

Question 2 (8 marks) Consider two assets A and B. Asset A offers an expected rate of return of 12% with a standard deviation of 25%. Asset B offers an expected rate of return of 8% with a standard deviation of 30%. Assume that the risk-free interest rate (rf) is zero. Given that Stock A has higher return and lower risk than Stock B, would investors hold Stock B? If so, explain graphically under what conditions would investors hold Stock B. Question 2 (8 marks) Consider two assets A and B. Asset A offers an expected rate of return of 12% with a standard deviation of 25%. Asset B offers an expected rate of return of 8% with a standard deviation of 30%. Assume that the risk-free interest rate (rf) is zero. Given that Stock A has higher return and lower risk than Stock B, would investors hold Stock B? If so, explain graphically under what conditions would investors hold Stock B

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