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

question 27

Multiple Choice

Consider these two investment strategies: $$\begin{array} { l c c } & \text { Strategy 1(\%) } & \text { Strategy 2(\%) } \\\text { Expected return } & 6 & 9 \\\text { Standard deviation } & 0 & 4 \\\text { Highest return } & 6 & 15 \\\text { Lowest return } & 6 & 6 \\\hline\end{array}$$ 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 greater than or equal to the return of Strategy 1
• D) 2; it has the highest reward/risk ratio
• E) Both strategies are equally preferred.

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Definitions:

Directional

Pertains to hypotheses or research that specify a direction (increase or decrease) in the expected outcome.

Null Hypothesis

A default hypothesis that there is no significant difference or effect, typically to be tested against an alternative hypothesis.

Null Hypothesis

A statistical hypothesis that assumes no significant difference or effect exists between certain characteristics of a population or data.

Equals Sign

A symbol (=) indicating mathematical equality between two expressions.