Hole Con Shooz,Inc.has normally distributed returns with an expected return of 15% and a standard deviation of 5%,while Ed Allenmunds Shooz,Inc.has normally distributed returns with an expected return of 15% and a standard deviation of 15%.Which of the following is true?
A) Ed Allenmunds' investors are not being adequately compensated for relevant risk.
B) Hole Con is likely to experience returns larger than those of Ed Allenmunds.
C) Ed Allenmunds is more likely to have negative returns than Hole Con.
D) Rational investors will prefer Ed Allenmunds, Inc. over Hole Con Shooz, Inc.

Question

Quizplus · Accepted Answer

Ed Allenmunds has a higher standard deviation, indicating more volatility and a higher likelihood of negative returns compared to Hole Con, which has a lower standard deviation.