Question
Which of the following statements is most likely NOT correct? When comparing two investments, we should consider both their expected returns and their risks such
Which of the following statements is most likely NOT correct?
When comparing two investments, we should consider both their expected returns and their risks such as their market betas. | ||
If an investment project A is expected to earn higher returns than investment project B and both A and B have same risks, we should choose A as the better investment option. | ||
When comparing two investment options Oro and Uti, we find it's relatively easier to get good estimates of their expected returns than those of their risks. We should then make our investment choices solely based on the expected returns. | ||
It is possible that investment option A has a lower expected return than option B but you choose to invest in option A. Your justification is that option B, though having a higher expected return, is too risky. | ||
The security market line can be used as a benchmark for us to measure investment performance. In the risk/return diagram, if an investment lies over the security market line, it is underpriced; if an investment lies under the security market line, it is overpriced; if an investment sits on the security market line, it is correctly priced. |
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