Standard deviation versus coefficient of variation as measures of risk Greengage, Inc., a successful nursery, is considering several expansion projects. All the alternatives promise to produce an acceptable return. Data on four possible projects appear in the following table:

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Project. Expectedreturn. Range Standarddeviation

A. 12.7% 6.1% 3.3%

B 12.4% 5.3% 2.7%

C 13.1% 5.5% 3.1%

D 12.2% 4.6% 3.4%

a.Which project is least risky, based on the range of possible outcomes?

b.Which project has the lowest standard deviation? Explain why standard deviation may not be an entirely appropriate measure of risk for purposes of this comparison.

c.Calculate the coefficient of variation for each project. Which project do you think Greengage's owners should choose?

1.Which project is least risky, based on the range of possible outcomes?(Select the best answer below.)

A.Project C

B.Project B

C.Project D

D.Project A

2.Which project is least risky, judging on the basis of standard deviation?(Select the best answer below.)

A.Project C

B.Project B

C.Project A

D.Project D

3.Explain why standard deviation may not be an entirely appropriate measure of risk for purposes of this comparison. (Select the best answer below.)

A.The standard deviation measure fails to take into account both the volatility and the risk-free rate. Investors would prefer higher return but less volatility, and the coefficient of variation provides a measure that takes into account both aspects of investors' preferences.

B.The standard deviation measure fails to take into account both the volatility and the return of the investment. Investors would prefer lower return but higher volatility, and the coefficient of variation provides a measure that takes into account both aspects of investors' preferences.

C.The standard deviation measure fails to take into account both the volatility and the return of the investment. Investors would prefer higher return but less volatility, and the coefficient of variation provides a measure that takes into account both aspects of investors' preferences.

D.The standard deviation measure fails to take into account both the risk-free rate and the return of the investment. Investors would prefer higher return but less volatility, and the coefficient of variation provides a measure that takes into account both aspects of investors' preferences.