Exhibit 1-5
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $\begin{array}{l}\text {Canadian T-bils } &2.75 \% \\\text {Canadian corporate bonds } &4.75 \%\end{array}$

question 35

Multiple Choice

Exhibit 1-5
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Assume that during the past year the consumer price index increased by 1.5% percent and the securities listed below returned the following nominal rates of return.
$\begin{array}{l}\text {Canadian T-bils } &2.75 \% \\\text {Canadian corporate bonds } &4.75 \%\end{array}$
-Given investments A and B with the following risk return characteristics, which one would you prefer and why? $\begin{array}{lll}\text { Investment } & \text { Expected Return } & \begin{array}{l}\text { Standard Deviation } \\\text { of Expected Returns }\end{array} \\\hline \mathrm{A} & 12.2 \% & 7 \% \\\mathrm{~B} & 8.8 \% & 5 \%\end{array}$

• A) Investment A because it has the highest expected return.
• B) Investment A because it has the lowest relative risk.
• C) Investment B because it has the lowest absolute risk.
• D) Investment B because it has the lowest coefficient of variation.
• E) Investment A because it has the highest coefficient of variation.