Rank the Following Three Stocks by Their Risk-Return Relationship, Best

question 77

Multiple Choice

Rank the following three stocks by their risk-return relationship, best to worst. Rail Haul has an average return of 8 percent and standard deviation of 10 percent. The average return and standard deviation of Idol Staff are 10 percent and 20 percent; and of Poker-R-Us are 6 percent and 15 percent.

• A) Rail Haul, Idol Staff, Poker-R-Us
• B) Idol Staff, Rail Haul, Poker-R-Us
• C) Poker-R-Us, Idol Staff, Rail Haul
• D) Idol Staff, Poker-R-Us, Rail Haul

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Definitions:

Accounting Profit

The total revenue of a business minus explicit costs, representing the monetary gain recorded in financial statements.

Economic Profit

The gap between total income and all expenses, covering both explicit and hidden costs.

Mutual Fund

A type of investment vehicle that pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities.

Either-Or Decision

An either-or decision refers to a choice between two mutually exclusive options, where selecting one means forgoing the other.