Given Investments a and B with the Following Risk Return

question 36

Multiple Choice

Given investments A and B with the following risk return characteristics,which one would you prefer and why?
$\begin{array}{ccc}\text { Investment } & \text { Expected Retumn } & \begin{array}{c}\text { Standard Deviation } \\\text { of Expected Returns }\end{array} \\\hline \mathrm{A} & 12.2 \% & 7 \% \\\mathrm{R} & 8.8 \% & 5 \%\end{array}$

• A) Investment A because it has the highest expected return.
• B) Investment A because it has the lowest relative risk.
• C) Investment B because it has the lowest absolute risk.
• D) Investment B because it has the lowest coefficient of variation.
• E) Investment A because it has the highest coefficient of variation.

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Definitions:

Anergia

A state of reduced energy or enthusiasm, often seen in depressive conditions.

Anhedonia

The inability to feel pleasure in normally pleasurable activities, often a symptom of depression or other mental health disorders.

Psychomotor Retardation

A slowing-down of thought and a reduction of physical movements in an individual, often observed in major depressive disorders.

Guilty Ruminations

Obsessive thoughts focused on guilt over actions taken or not taken, often contributing to emotional distress.