X has actually a supposed go back of five% and you can a standard departure regarding 10%. Y keeps a supposed return of 8% and you will a standard deviation from 20%. The latest riskless interest is actually step 3%. According to the proportion out-of asked come back to basic deviation, X (5/ten, otherwise 0.50) is better than Y (8/20, or 0.40). 20) is actually inferior compared to Y (5/20, or 0.25).
Now, believe a trader who wishes to receive a basic deviation from 10%. That is reached having money X, which will offer a supposed get back of five.0%. It can also be achieved having an investment away from fifty% of one's investor's financing into the Y and you will fifty% on riskless investment.