Question 1

Investment A offers a return of 10% (per year) while Investment B offers a return of 25% (per year). Based on your understanding of the risk-return tradeoff, which investment should be riskier?

a) Investment A.

b) Investment B.

c) Both investments are equally risky.

d) Cannot be determined from the question.

Question 2

Stock A has a standard deviation of 8% (per year) while Stock B has a standard deviation of 5% (per year). Which stock is more volatile?

a) Stock A.

b) Stock B.

c) Both stocks are equally volatile.

d) Cannot be determined from the question.

Question 3

Given these three market scenarios, what is the expected return of Stock X?

a) 16%

b) 5%

c) 20%

d) 10%

e) None of the above.

Bear Market Normal Market Bull Market Probability 0.2 0.5 0.3 Stock X -20% 18% 50% Stock Y -15% 20% 10%