Asset a Has an Expected Return of 15% and a Reward-To-Variability

question 9

Multiple Choice

Asset A has an expected return of 15% and a reward-to-variability ratio of .4. Asset B has an expected return of 20% and a reward-to-variability ratio of .3. A risk-averse investor would prefer a portfolio using the risk-free asset and ________.

• A) asset A
• B) asset B
• C) no risky asset
• D) The answer cannot be determined from the data given.

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Definitions:

High Ethical Standards

Principles that guide individuals and organizations to conduct activities in a morally right, honest, and responsible manner.

Organisations

Groups or entities (such as corporations, nonprofits, institutions) structured to achieve specific goals through collective effort.

Accommodative Strategy

Accepts social responsibility and tries to satisfy prevailing economic, legal and ethical performance criteria.

Discretionary Responsibilities

Obligations that an individual or organization chooses to undertake out of ethical or moral principles rather than because of legal requirements.