Question

Rank the following three stocks by their total risk level, highest to lowest. night ryder has an average return of 10 % and standard deviation of 30 %. the average return and standard deviation of wholemart are 11 % and 35 %; and of fruit fly are 16 % and 32 %.

Answer 1

The stocks are ranked by total risk level, from highest to lowest, based on their standard deviations: Wholemart with 35%, Fruit Fly with 32%, and Night Ryder with 30%, making Wholemart the riskiest and Night Ryder the least risky.

Step-by-step explanation:

To rank the following stocks by their total risk level, from highest to lowest, we consider their respective standard deviations, which measure the variability of their returns and thus their riskiness. The standard deviation is a commonly used indicator of risk in the context of investments: the higher the standard deviation, the higher the risk.

The stocks can be ranked as follows:

1. Wholemart: highest risk with a standard deviation of 35%.
2. Fruit Fly: second highest risk with a standard deviation of 32%.
3. Night Ryder: lowest risk among the three, with a standard deviation of 30%.

It's important to note that while the average return can provide information about the potential gain from an investment, it is the standard deviation that informs us about the uncertainty or risk associated with the returns. Hence, Wholemart is considered the riskiest investment followed by Fruit Fly, with Night Ryder being the least risky of the trio.