Question: You can purchase security A for $50 today and security B for $100. You expect security A to be worth $75 next year and B

You can purchase security A for $50 today and security B for $100. You expect security A to be worth $75 next year and B to be worth $150. You also believe that the standard deviation of next years price for A is larger than that of B.

Suppose that you can choose only one of these securities and the choice would be 100% of your portfolio.

Which security do you prefer to purchase? Explain your logic.

If you require additional information, identify what information is needed. Note that the usual assumptions apply, namely that you are risk-averse, making optimal decisions, and the payoffs are normally distributed.

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