If Three Investment Alternatives All Have Some Degree of Risk

question 20

Multiple Choice

If three investment alternatives all have some degree of risk and different expected returns, which of the following measures could best be used to rank the risk levels of the projects?

• A) coefficient of correlation
• B) coefficient of variation
• C) standard deviation of returns
• D) net present value

---

Definitions:

Interaction Effect

In statistics, the effect that exists when two or more variables combine to affect the outcome of a dependent variable in a way that cannot be simply added.

Main Effect

In experimental design, a main effect is the direct impact of an individual independent variable on a dependent variable, ignoring the effects of other variables.

Simple Effect

The effect of one factor at a specific level of another factor in a factorial design experiment.

Factorial Research

A methodological approach in experiments where researchers study the effects of two or more independent variables across multiple levels.