Three years ago American Insulation Corporation issued 10%, $950,000, 12-year bonds for $845,000. American Insulation exercised its call privilege and retired the bonds for $890,000. The corporation uses the straight-line method to determine interest.

Two assets have the following expected returns and standard deviations when the risk-free rate is 5%: asset a e(ra) = 18.5% σa = 20% asset b e(rb) = 15% σb = 27% an investor with a risk aversion of a = 3 would find that on a risk-return basis. a. only asset a is acceptable b. only asset b is acceptable c. neither asset a nor asset b is acceptable d. both asset a and asset b are acceptable