-Which of the Four Investments Has the Highest Coefficient of }

question 27

Multiple Choice

$\begin{array}{|l|c|c|}\hline \text { Asset } & \begin{array}{c}\text { Expected return } \\(\mathrm{E}(\mathrm{R}) \boldsymbol{) }\end{array} & \begin{array}{c}\text { Standard deviation } \\\text { (ธ) }\end{array} \\\hline \mathrm{A} & 10 \% & 9 \% \\\hline \mathrm{B} & 12 \% & 8 \% \\\hline \mathrm{C} & 15 \% & 12 \% \\\hline \mathrm{D} & 13 \% & 11 \% \\\hline\end{array}$
-Which of the four investments has the highest coefficient of variation?

• A) \(\text { Asset } A\)
• B) \(\text { Asset } B\)
• C) \(\text { Asset } C\)
• D) \(\text { Asset } D\)

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Definitions:

Accounts Receivable Factor

A financial transaction where a company sells its accounts receivable to a third party (factor) at a discount, to obtain immediate cash.

Bad Debt Risk

The risk that money owed to a company by debtors will not be paid and thus become a bad debt.

Compensating Balance

A minimum account balance that a borrower must maintain as part of a condition for obtaining a loan.

Line of Credit

A flexible loan from a bank or financial institution that allows a borrower to draw and use funds up to a designated limit.