Share A has an expected return of 8% and a risk level of 10%. Share B has an expected return of 8% and a risk level of 14%. Which would you choose?
A) A.
B) B.
C) Indifferent as expected return is the same.
D) Neither as risk is too high.

Question

Quizplus · Accepted Answer

Given the same expected return of 8% for both shares, the rational choice would be to select the share with the lower risk level, which is Share A with a risk level of 10%. This aligns with the principle of risk aversion, where, all else being equal, investors prefer lower risk for a given level of expected return.

Share a Has an Expected Return of 8% and a Risk