ECONOMICS
RISK AND RETURN
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Stock A has a mean return of 7% and a standard deviation of 2%
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Stock B has a mean return of 7% and a standard deviation of 10%
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Stock C has a mean return of 12% and a standard deviation of 10%
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Stock D has a mean return of 12% and a standard deviation of 20%
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Detailed explanation-1: -Investing in equities, ETF’s or equity mutual funds has greater risk tolerance than others. However, investing in bond instruments like bond mutual funds possess lower risk tolerance.
Detailed explanation-2: -The highest risk investments are cryptocurrency, individual stocks, private companies, peer-to-peer lending, hedge funds and private equity funds.
Detailed explanation-3: -Investment Products Over many decades, the investment that has provided the highest average rate of return has been stocks. But there are no guarantees of profits when you buy stock, which makes stock one of the most risky investments.
Detailed explanation-4: -An aggressive investor, or one with a high risk tolerance, is willing to risk losing money to get potentially better results. A conservative investor, or one with a low risk tolerance, favors investments that maintain his or her original investment.