David recently received an inheritance, and he is planning to invest the inheritance in one of four stock portfolios. Which of these portfolios would you expect to have the highest risk?
A)A portfolio with an average annual rate of return of 5%.
B)A portfolio with an average annual rate of return of 8%.
C)A portfolio with an average annual rate of return of 10%.
D)A portfolio with an average annual rate of return of 14%.

Question

David recently received an inheritance, and he is planning to invest the inheritance in one of four stock portfolios. Which of these portfolios would you expect to have the highest risk?​
A)​A portfolio with an average annual rate of return of 5%.
B)​​A portfolio with an average annual rate of return of 8%.
C)​​A portfolio with an average annual rate of return of 10%.
D)​​A portfolio with an average annual rate of return of 14%.

Quizplus · Accepted Answer

Higher potential returns are typically associated with higher risk, so the portfolio with a 14% average annual rate of return is likely to have the highest risk.

David Recently Received an Inheritance, and He Is Planning to Invest