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:

Lost Sales

Revenue opportunities foregone due to stockouts, production constraints, or market limitations.

Setup Time

The amount of time required to prepare equipment, machinery, or systems for operation or production.

Manufacturing Cycle Efficiency

A measure of the efficiency of the production process, typically calculated as the value-added time as a proportion of the total throughput time.

Value-Added Time

The duration during which a product or service is being modified or enhanced to increase its value to the customer.