Rank the Following Three Stocks by Their Risk-Return Relationship, Best

question 44

Multiple Choice

Rank the following three stocks by their risk-return relationship, best to worst. Rail Haul has an average return of 10 percent and standard deviation of 15 percent. The average return and standard deviation of Idol Staff are 15 percent and 25 percent; and of Poker-R-Us are 12 percent and 35 percent.

• A) Rail Haul, Idol Staff, Poker-R-Us
• B) Idol Staff, Poker-R-Us, Rail Haul
• C) Poker-R-Us, Idol Staff, Rail Haul
• D) Idol Staff, Rail Haul, Poker-R-Us

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Definitions:

Security Interest

A legal claim or encumbrance on property or assets, securing the payment of a debt or performance of some other obligation.

Collateral

Assets pledged by a borrower to secure a loan or credit, which can be seized by the lender if the borrower fails to repay.

Perfected Interest

A legal claim or lien that has been formally established to secure priority over other claims concerning the same asset or property.

Repossession

The process by which a creditor takes back property from the borrower, due to failure to make required payments.