ECONOMICS
RISK AND RETURN
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Investment A:E(R) = 22%; SD = 10%
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Investment B:E(R) = 24%; SD = 12%
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Investment C:E(R) = 21%; SD = 14%
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Investment D:E(R) = 20%; SD = 11%
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Detailed explanation-1: -In finance, the co-efficient of variation allows investors to determine how much volatility, or risk, is assumed in comparison to the amount of return expected from investments. The lower the ratio of the standard deviation to mean return, the better risk-return tradeoff.
Detailed explanation-2: -The highest risk investments are cryptocurrency, individual stocks, private companies, peer-to-peer lending, hedge funds and private equity funds. High-risk, volatile investments may bring high rewards, or they may bring high loss.
Detailed explanation-3: -There is no specific value that is considered “low” for a coefficient of variation. Instead, the coefficient of variation is often compared between two or more groups to understand which group has a lower standard deviation relative to its mean.
Detailed explanation-4: -High-yield savings accounts. Series I savings bonds. Short-term certificates of deposit. Money market funds. Treasury bills, notes, bonds and TIPS. Corporate bonds. Dividend-paying stocks. Preferred stocks. More items •01-Mar-2023