A Stock Has an Expected Return of 15 Percent and a Standard

question 1

Multiple Choice

A stock has an expected return of 15 percent and a standard deviation of 20 percent.Long-term Treasury bonds have an expected return of 9 percent and a standard deviation of 11 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:

Variable Costs

Costs that vary directly with the level of production or sales volume, such as raw materials and labor expenses.

Total Fixed Costs

Costs that do not vary with the level of output or sales, such as rent, salaries, and insurance premiums.

Total Costs

sum up all the costs incurred by a business in the production of goods or services, including both fixed and variable costs.

Economic Profits

The profit a firm makes after deducting both its explicit and implicit costs, reflecting the total opportunity costs of all resources used.