Consider two possible investments with the same expected rate of return.Over the past several months,investment A has had an average closing price of $14.00 and a standard deviation of $4.00.Investment B has had an average closing price of $58.00 and a standard deviation of $15.00.The market value of investment A fluctuates relatively more than investment B.

Question

Quizplus · Accepted Answer

The standard deviation of investment A is 28.57% of its average closing price ($4/$14), while the standard deviation of investment B is 25.86% ($15/$58). This means that investment A has a higher degree of fluctuation relative to its average closing price compared to investment B. Therefore, the statement is true - the market value of investment A fluctuates relatively more than investment B, even though they have the same expected rate of return.

Consider Two Possible Investments with the Same Expected Rate of Return.Over