An Investor Is Faced with the Decision of Whether to Invest

question 51

Multiple Choice

An investor is faced with the decision of whether to invest in a stock with an expected return of 14% or a stock in the same industry with an expected 20% return.Which of the following seems most likely?

• A)the 20% stock is a better investment.
• B)the 14% stock is overpriced.
• C)Both stocks will have approximately the same return.
• D)Both stocks are priced correctly given their perceived risk.

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Definitions:

Standard Deviation

A measure of the dispersion or variability of a set of data points, indicating how spread out the numbers are.

Sample Mean

The average of all observations or data points in a sample.

Random Sample

A subset of a statistical population in which each member has an equal chance of being chosen for analysis or observation.

University Committee

A group of faculty members and sometimes students who come together to make decisions or manage certain aspects of university governance.