Consider These Two Investment Strategies Strategy __________ Is the Dominant Strategy Because __________

question 24

Multiple Choice

Consider these two investment strategies: $$\begin{array} { | l | l | l | } \hline & \text { Strategy 1 } ( \% ) & \text { Strategy 2 } ( \% ) \\\hline \text { Expected return } & 5 & 10 \\\hline \text { Standard deviation } & 0 & 3 \\\hline \text { Highest return } & 6 & 12 \\\hline \text { Lowest return } & 5 & 6 \\\hline\end{array}$$ Strategy __________ is the dominant strategy because __________.

• A)1, it is riskless
• B)1, it has the highest reward/risk ratio
• C)2, its return is at least equal to Strategy 1 and sometimes greater
• D)2, it has the highest reward/risk ratio
• E)both strategies are equally preferred.

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Definitions:

Interdependence

The mutual reliance between two or more entities, where the actions of one significantly affect the other, prevalent in global economies.

Gains From Trade

The benefits that parties obtain from engaging in voluntary trade, often resulting in an increase in overall economic efficiency and consumer welfare.

Gain From Trade

Refers to the increase in output and consumption that countries experience through specialization and exchange of goods and services.

Production Possibilities Frontier

An illustration that represents the utmost production capabilities for any two commodities, based on a combination of inputs like resources and additional elements.