Question

Assume that two investment opportunities have identical expected values of $100,000.Investment A has a variance of 25,000, while investment B’s variance is 10,000. Wewould expect most investors (who dislike risk) to prefer investment opportunity:_____.

a. investment opportunity because it has less risk.
b. investment opportunity because it provides higher potential earnings.
c. investment opportunity B because it has less risk.
d. investment opportunity B because of its higher potential earnings.

Answer 1

c. investment opportunity B because it has less risk.

Step-by-step explanation:

Data provided in the question

Identical expected values = $100,000

Variance of investment A = 25,000

Variance of investment B = 10,000

By considering the above information

As we can see that the variance of investment A is 25,000 and the variance of investment B is 10,000 which is less as compared to investment A

So in this case the investment B has less risk