An Investor with High Risk Aversion Will Likely Prefer Which

question 66

Multiple Choice

An investor with high risk aversion will likely prefer which of the following risk and return combinations?

• A) expected return = 12%, historical standard deviation = 17%
• B) expected return = 14%, historical standard deviation = 19%
• C) expected return = 16%, historical standard deviation = 21%
• D) expected return = 18%, historical standard deviation = 23%

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Definitions:

Cash

Liquid currency and assets readily convertible to currency, used by businesses to conduct transactions.

Owner's Equity

The residual interest in the assets of the entity after deducting liabilities, representing the owners' claim on the business assets.

Withdrawals

Funds taken out from a business by its owner(s) for personal use, which reduce the capital accounts in the company’s equity section.

Revenue

The global earnings a company obtains from its key operational trades, especially in goods or services sales.