Question

Which investment has the least amount of risk?

A. standard deviation = $500, expected return = $5,000
B. standard deviation = $700, expected return = $500
C. standard deviation = $900, expected return = $800
D. standard deviation = $400, expected return = $350

Answer 1

A. standard deviation = $500, expected return = $5,000

Step-by-step explanation:

For analysis which investment involved the least amount of risk we need to determine the coefficient of variation i.e. shown below:

As we know that

Coefficient of variance = standard deviation ÷ expected return

A = $500 ÷ $5,000 = 0.10

B = $700 ÷ $500 = 1.40

C = $900 ÷ $800 = 1.125

D = $400 ÷ 350 = 1.143

As it can be seen that investment A has the leas amount of risk hence, the same is to be considered