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Suppose you are an investor with a choice between three securities that are identical in every way except in terms of their rates of return
Suppose you are an investor with a choice between three securities that are identical in every way except in terms of their rates of return and risk. Which investment has the lowest risk, as measured by standard deviation.
Investment A: | Total return = 5 percent with probability 50 percent |
Total return = 15 percent with probability 50 percent | |
Investment B: | Total return = 8 percent with probability 50 percent |
Total return = 12 percent with probability 50 percent | |
Investment C: | Total return = 0 percent with probability 90 percent |
Total return = 2 percent with probability 10 percent | |
Investment A | ||
Investment B | ||
Investment C | ||
All of the above have the same risk. |
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