Susan is planning to invest in one of four stock portfolios,and her financial advisor has given her details regarding the risk associated with each portfolio.Which of the following portfolios would you expect to have the highest average annual rate of return?
A)A portfolio with a standard deviation of 3%.
B)A portfolio with a standard deviation of 6%.
C)A portfolio with a standard deviation of 9%.
D)A portfolio with a standard deviation of 12%.

Question

Susan is planning to invest in one of four stock portfolios,and her financial advisor has given her details regarding the risk associated with each portfolio.Which of the following portfolios would you expect to have the highest average annual rate of return?
A)​A portfolio with a standard deviation of 3%.
B)​​​A portfolio with a standard deviation of 6%.
C)​A portfolio with a standard deviation of 9%.
D)​A portfolio with a standard deviation of 12%.

Quizplus · Accepted Answer

Generally, portfolios with higher risk, as measured by standard deviation, are expected to have higher average returns. Therefore, the portfolio with the highest standard deviation, which is 12%, is the one that would be expected to have the highest average annual rate of return.

Susan Is Planning to Invest in One of Four Stock