If two investments, X and Y, have the same expected return an individual investor would prefer:
A)the one with a higher standard deviation.
B)the one with a higher mean.
C)the one with a lower correlation coefficient.
D)the one with a lower variance.

Question

Quizplus · Accepted Answer

The lower the variance, the less risky the investment is. Therefore, if two investments have the same expected return, the one with a lower variance would be preferred by an individual investor as it carries less risk.

If Two Investments, X and Y, Have the Same Expected