Solve the problem.
-The rate of return of certain investments increases as the risk factor of the investment increases. An investment with a risk factor of 2 has a rate of return of 5.0%. An investment with a risk factor of
24 has a rate of return of 25.0%. What is the average rate of change in return per unit of risk?
Round to two decimal places.
A) 1.10% per unit risk
B) 0.83% per unit risk
C) 1.21% per unit risk
D) 0.91% per unit risk

Question

Quizplus · Accepted Answer

The average rate of change in return per unit of risk is calculated by taking the difference in the rates of return and dividing by the difference in the risk factors. This gives $\frac{25.0\% - 5.0\%}{24 - 2} = \frac{20\%}{22} = 0.909\%$, which rounds to 0.91% per unit risk.

Solve the Problem. -The Rate of Return of Certain Investments Increases as the Increases