You Are Comparing the Returns of Two Portfolios for a 10-Year

question 34

Multiple Choice

You are comparing the returns of two portfolios for a 10-year period.Portfolio I has a lower dispersion of returns and a higher average rate of return than Portfolio II.Given this,what do you know with certainty?

• A)Portfolio I has a lower standard deviation than Portfolio II.
• B)Portfolio I is riskier than Portfolio II.
• C)Portfolio II has less total risk than Portfolio I.
• D)Portfolio I will outperform Portfolio II over the next 10 years.
• E)Portfolio II consists of more individual stocks than Portfolio I.

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Definitions:

Related Party Transaction

A deal or arrangement between two parties who are joined by a special relationship prior to the deal.

Significant Influence

The power to participate in the financial and operating policy decisions of an investee but not to control those policies.

Related Parties

Individuals or entities that are closely connected to a business, potentially influencing the financial and operating results.

Investment

The allocation of resources, typically money, in the expectation of generating an income or profit.