Suppose E[r_A] = 14 $\sigma$ _A = 17 $\sigma$ _B = 31

question 2

Multiple Choice

Suppose E[r_A] = 14.8%, $\sigma$ _A = 17.9%, E[r_B] = 17.1%, and $\sigma$ _B = 31.9%. Assuming a mean-variance framework, which of the following statements is true?

• A) A is preferred to B.
• B) B is preferred to A.
• C) A and B are equally desirable.
• D) Whether A or B is preferred depends on the correlation between the two assets.
• E) Which asset is preferred depends on individual preferences.

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Definitions:

Just-In-Time (JIT)

A production and inventory control system in which materials are purchased and units are produced only as needed to meet actual customer demand.

Customer Demand

The total amount of a product or service that consumers are willing to purchase at a given price level within a specific time period.

Just-In-Time (JIT)

A management strategy that aligns raw-material orders from suppliers directly with production schedules to reduce inventory costs and increase efficiency.

Production Capacity

The maximum output that a business can produce in a given period with the available resources.