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Expected return and dislike variance

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Investors like expected return and dislike variance. Assume that investors can allocate their wealth across two assets. Asset 1 (e.g., bank account 1) has expected return of 1% and standard deviation of 0%.

Asset 2 (e.g., bank account 2) has expected return 0.5% and standard deviation of 0%. Except for the difference in expected returns, assets are identical. Given that asset 1 is superior to asset 2 as it offers a higher expected return with the same standard deviation, will any investor allocate any fraction of their wealth to asset 2? Please explain your answer.

Reference no: EM133060761

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