Sharon Smith, the financial manager for Barnett Corporation, wishes to evaluate three prospective investments: X, Y, and Z. Sharon will evaluate each of these investments to decide whether they are superior to investments that her company already has in place, which have an expected return of 12% and a standard deviation of 5%. The expected returns and standard deviations of the investments are as follows:
a. If Sharon were risk neutral, which investment might she select?
b. If she were risk averse, which investment might she select?
c. If she were risk seeking, which investments might she select?
d. Given the traditional risk preference behavior exhibited by financial managers, which investment might be preferred?