An investment fund manager is evaluating two different investment options: Option A and Option B. Option A has an expected return of 10% with a standard deviation of 5%, while Option B has an expected return of 8% with a standard deviation of 3%. The manager is risk-averse and wants to choose the option with the lowest risk. Assuming the returns of both options are normally distributed, which option should the manager choose? Use the coefficient of variation to make the decision.

a) Calculate the coefficient of variation for Option A and Option B.

b) Based on the coefficient of variation, which option should the manager choose?

Show all calculations and express your final answer as the name of the chosen option. (20 marks)

Answer rating: 100% (QA)

The detailed answer for the above question is provided below a The coefficient of variation CV is ... View the full answer