Use the Below Information to Answer the Following Question U = E(r ) - (A/2)s2 Which Investment Would You

question 48

Multiple Choice

Use the below information to answer the following question. $$\begin{array} { l c c } \text { Investment } & \begin{array} { c } \text { Expected } \\\text { Return E(r) }\end{array} & \begin{array} { c } \text { Standard } \\\text { Deviation }\end{array} \\1 & 0.12 & 0.3 \\2 & 0.15 & 0.5 \\3 & 0.21 & 0.16 \\4 & 0.24 & 0.21 \\\hline\end{array}$$ U = E(r ) - (A/2) s2 Which investment would you select if you were risk neutral?

• A) 1
• B) 2
• C) 3
• D) 4
• E) Cannot be determined from the information given.

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Definitions:

Interest Calculation

The process of determining the amount of interest earned or paid on a financial instrument or account, based on the principal, the rate, and the time.

Fair Value

The price that would be received for an asset if it were sold today.

Face Value

The face value or monetary amount shown on a financial document, like a bond or share certificate.

Accounts Receivable Turnover

A financial metric indicating how many times a company collects its average accounts receivable balance in a period.