A Stock Has an Expected Return of 12 Percent and a Standard

question 27

Multiple Choice

A stock has an expected return of 12 percent and a standard deviation of 25 percent. Long-term Treasury bonds have an expected return of 5 percent and a standard deviation of 9 percent. Given this data, which of the following statements is correct?

• A) The two assets have the same coefficient of variation.
• B) The stock investment has a better risk-return trade-off.
• C) The bond investment has a better risk-return trade-off.
• D) The stock investment and the bond investment have the same diversifiable risk.

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Definitions:

Task Time

The duration required to complete a specific task or activity within a project or operational process.

Constant Allowances

Fixed time values added to the normal time required for a task, accounting for delays or non-work related activities.

Performance Rating

An evaluation of an individual's or machine's work output against a set standard.

Normal Time

The average time that should be taken to complete a task or process under normal working conditions.