Which two of the following conditions could mean that Project X will be preferred to Project Y, under the Mean- variance rule.
A) The variance of X is equal to or less than that of Y.
B) The variance of X is less than that of Y.
C) The expected return of X is at least equal to the expected return of Y.
D) The expected return of X is less than that of Y.

Question

Quizplus · Accepted Answer

The Mean-Variance rule states that investors should prefer projects with higher expected returns and lower variances. Therefore, Project X will be preferred to Project Y if its expected return is at least equal to that of Y (condition C) and its variance is equal to or less than that of Y (condition A).

Which Two of the Following Conditions Could Mean That Project