Which of the following measures captures the effects of both risk and return, which makes it a better measure than standard deviation for evaluating stand-alone risk in situations where investments differ with respect to both their amounts of total risk and their expected returns?
A)Probability distribution of the investment's returns
B)Expected average rate of returns of the investment
C)Correlation coefficient of one investment with another investment
D)Coefficient of variation
E)Beta coefficient

Question

Quizplus · Accepted Answer

The coefficient of variation (CV) is a ratio that measures the stand-alone risk of an investment relative to its expected return. It takes into account the differences in the total risk and expected returns of different investments, making it a better measure than standard deviation for evaluating stand-alone risk. The CV is calculated as the standard deviation of the investment divided by its expected return.

Which of the Following Measures Captures the Effects of Both