Which of the following pairs of portfolios exemplifies the risk-return tradeoff?
A)For Portfolio A, the average return is 6 percent and the standard deviation is 15 percent; for Portfolio B, the average return is 6 percent and the standard deviation is 25 percent.
B)For Portfolio A, the average return is 5 percent and the standard deviation is 15 percent; for Portfolio B, the average return is 8 percent and the standard deviation is 15 percent.
C)For Portfolio A, the average return is 5 percent and the standard deviation is 25 percent; for Portfolio B, the average return is 8 percent and the standard deviation is 15 percent.
D)For Portfolio A, the average return is 5 percent and the standard deviation is 15 percent; for Portfolio B, the average return is 8 percent and the standard deviation is 25 percent.

Question

Quizplus · Accepted Answer

Portfolio D exemplifies the risk-return tradeoff because Portfolio B offers a higher return (8%) with a higher risk (25% standard deviation) compared to Portfolio A, which has a lower return (5%) and lower risk (15% standard deviation).

Which of the Following Pairs of Portfolios Exemplifies the Risk-Return