Investment A has an expected return of 8% with a standard deviation of 12%. Investment B has an expected return of of 10% with a standard deviation 15%.
A) Investment A should be preferred because of its lower risk.
B) Investment B should be preferred because of its higher rate of return.
C) Preference for A or B would depend on the investor's risk tolerance.
D) Neither investment is acceptable because their standard deviations are greater than their expected rates of return.

Question

Quizplus · Accepted Answer

Preference between Investment A and Investment B depends on the investor's risk tolerance. Investors who are risk-averse may prefer Investment A due to its lower standard deviation (indicating lower risk), while those seeking higher returns and willing to accept higher risk may prefer Investment B.

Investment a Has an Expected Return of 8% with a Standard