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Risk return characteristics

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Given investments A and B with the following risk return characteristics, which of the following is a correct statement that is the best reason to prefer that investment, and why?

Investment A
Expected Return: 12.2%
Std Deviation of Expected Return: 7%

Investment B
Expected Return: 9.8%
Std Deviation of Expected Return: 5%

A,- it has the highest expected return
A - it has the lowest relative return
B - it has the lowest absolute return
B - it has the lowest coefficient of variation
A - it has the highest coefficient of variation

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Solution Summary

The solution explains the correct option from the given alternatives with regards to risk return characteristics.

Solution Preview

Investments should be chosen based on risk and return together and not looking at only the return or the risk. Thus the first three options we cannot take ...

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