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 lowest 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 lowest 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

Generally, lower average annual rates of return are associated with lower risk, as higher returns often come with higher volatility and risk.

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