Question
Suppose an investor wants to invest either in the common stock of Square Corporation or Beximco Corporation. Square Corporation offers investors an expected rate of
Suppose an investor wants to invest either in the common stock of Square Corporation or Beximco Corporation. Square Corporation offers investors an expected rate of return equal to 39%, with a standard deviation of 20%. Square offers a higher expected return than Beximco Corporation (expected rate of return equals 31%, and the standard deviation equals 18%), but it is also riskier. The variance for Square Corporation is 400, and Beximco Corporation is 324. Concerning both risk and return, which corporation has lower risk per unit of return, and which investment would be the better investment? Why? Show calculation and explain with necessary numerical data.
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