Below are two examples of tossing two coins simultaneously, with the following probability distribution of returns: EXAMPLE #1 (Two coins tossed simultaneously)
Head + head yields 40% gain
Head + tail yields 10% gain
Tail + head yields 10% gain
Tail + tail yields 20% loss
EXAMPLE #2 (Two coins tossed simultaneously)
Head + head yields 70% gain
Head + tail yields 10% gain
Tail + head yields 10% gain
Tail + tail yields 50% loss
From the two examples, which of the following statements is true?
A) example 1 has a higher expected return, but also has higher risk
B) example 2 has a higher expected return, but also has higher risk
C) example 2 has a lower expected return, but also has higher risk
D) the examples have the same expected returns and example 2 has higher risk
Correct Answer:
Verified
Q3: Which of the following is true of
Q5: Recent thinking in theoretical finance grapples with
Q6: The return that investors feel is most
Q7: Risk is:
A)the probability that return will be
Q8: A stock that is risky on a
Q9: Modern portfolio theory suggests that:
A)it is always
Q10: Stocks that have high financial rewards are
Q11: Standard deviation is an important concept in
Q13: With respect to the probability distribution of
Q14: The underlying principles of portfolio theory include:
A)diversifying
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