Investment a Has an Expected Return of 15% Per Year,while

question 82

Multiple Choice

Investment A has an expected return of 15% per year,while investment B has an expected return of 12% per year.A rational investor will choose

• A)investment A because of the higher expected return.
• B)investment B because a lower return means lower risk.
• C)investment A if A and B are of equal risk.
• D)investment A only if the standard deviation of returns for A is higher than the standard deviation of returns for B.

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Definitions:

Incentive Function

The role of incentives in influencing the behavior and decisions of individuals or organizations.

Competitive Markets

Markets characterized by a large number of buyers and sellers, where no single entity controls the market prices.

Resource

Any physical or virtual entity of limited availability that needs to be consumed to obtain a benefit, including natural resources, human resources, and financial resources.