Investment a Has an Expected Return of 15% Per Year,while

question 40

Multiple Choice

Investment A has an expected return of 15% per year,while Investment B has an expected return of 12% per year.A rational investor will choose

• A) Investment A because of the higher expected return.
• B) Investment B because a lower return means lower risk.
• C) Investment A if A and B are of equal risk.
• D) Investment A only if the standard deviation of returns for A is higher than the standard deviation of returns for B.

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Definitions:

Marginal Revenue

Marginal revenue is the additional income generated from selling one more unit of a good or service.

Profit-Maximizing

A method or plan designed to maximize profits from business activities.

Fixed Costs

Expenses that remain constant regardless of the amount of goods produced or sold, including lease payments, wage bills, and insurance fees.

Market Price

The existing rate at which an asset or service is offered for buying or selling.