Assume That a New Law Is Passed Which Restricts Investors

question 91

Multiple Choice

Assume that a new law is passed which restricts investors to holding only one asset.A risk-averse investor is considering two possible assets as the asset to be held in isolation.The assets' possible returns and related probabilities (i.e., the probability distributions) are as follows: Which asset should be preferred?

• A) Asset X, since its expected return is higher.
• B) Asset Y, since its beta is probably lower.
• C) Either one, since the expected returns are the same.
• D) Asset X, since its standard deviation is lower.
• E) Asset Y, since its coefficient of variation is lower and its expected return is higher.

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Definitions:

Base-10 Number System

The base-10 number system, also known as the decimal system, is a numbering system that uses 10 as its base and includes digits from 0 to 9.

Irregular Number Words

Describes number words that do not follow a typical pattern or sequence found in the linguistic representation of numbers.

Pig Latin

A playful form of language created by altering the letters in English words, typically for amusement or secret communication.

Syllables

The units of organization for a sequence of speech sounds, typically consisting of a vowel sound or a vowel and consonant combination.