A Stock Has an Expected Return of 12 Percent and a Standard

question 9

Multiple Choice

A stock has an expected return of 12 percent and a standard deviation of 20 percent.Long-term Treasury bonds have an expected return of 9 percent and a standard deviation of 15 percent.Given this data,which of the following statements is correct?

• A) The two assets have the same coefficient of variation.
• B) The stock investment has a better risk-return trade-off.
• C) The bond investment has a better risk-return trade-off.
• D) Both investments have the same diversifiable risk.

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Definitions:

Size Tolerance

The allowable deviations in dimensions defining the limits within which a part must be manufactured to ensure fit and function.

Positional Tolerancing

Positional tolerancing is a geometric dimensioning method expressing the allowable variation in the position of a feature within a part, relative to its reference features.

ASME

American Society of Mechanical Engineers, an organization that develops engineering standards and codes.

Coordinate Tolerancing

A system of defining dimensions and tolerances using a Cartesian coordinate system to control individual features.