Investments a and B Both Offer an Expected Rate of Return

question 44

Multiple Choice

Investments A and B both offer an expected rate of return of 12. The standard deviation of A is 30 percent and that of B is 20 percent. If an investor wishes to invest in either A or B, then the investor should

• A)prefer A to B.
• B)prefer B to A.
• C)prefer a portfolio including both A and B.
• D)The answer cannot be determined without knowing investors' risk preferences.

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Definitions:

Spore

A unit of sexual or asexual reproduction that may be adapted for dispersal and for survival, often for extended periods of time, in unfavorable conditions.

Diploid Stage

A phase in an organism's life cycle where its cells contain two sets of chromosomes, one set inherited from each parent.

Adverse Environmental

Conditions or factors in the environment that can cause harm or negative effects on living organisms or ecosystems.

Sporophyte

The diploid, spore-producing phase in the life cycle of a plant that alternates with the haploid gametophyte phase.