If Two Assets Have the Same Expected Rate of Return

question 16

True/False

If two assets have the same expected rate of return but different variances, a risk-averse investor should always choose the one with the smaller variance, no matter what other assets she holds.

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Definitions:

Periodic Leasehold

A lease agreement that automatically renews for successive periods until either party terminates the tenancy, often seen in month-to-month tenancies.

Terminated

Indicates the end or conclusion of something, such as a contract, job position, or legal status, often before its intended completion time.

Adequate Notice

Adequate notice refers to sufficient information and time being provided to individuals or parties, allowing them to prepare and respond appropriately to legal actions or changes.

Fee Simple

A type of freehold ownership where the owner has the maximum possible rights to the land or property, under the law, including the right to sell or inherit it.