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

question 6

Multiple Choice

A stock has an expected return of 12 percent and a standard deviation of 25 percent.Long-term Treasury bonds have an expected return of 5 percent and a standard deviation of 9 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:

Intensity

The quality or state of being intense; often refers to the degree or amount of strength, force, energy, or feeling.

Physiological Change

Any alteration in the normal functioning or structure of a living organism, often in response to environmental factors or internal conditions.

Adrenalin Secretion

The release of adrenaline (epinephrine) from the adrenal glands, which triggers the body's fight-or-flight response.

Sympathetic Nervous System

Part of the autonomic nervous system that activates what is often termed the fight or flight response.