You should recognize that basing a decision solely on expected returns is only appropriate for risk neutral
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You should recognize that basing a decision solely on expected returns is only appropriate for risk neutral individuals. Since your client, like virtually everyone, is risk averse, the riskiness of each alternative is an important aspect of the decision. One possible measure of risk is the standard deviation of returns.
Calculate this value for each alternative, and fill in the blank on the row for σ in the table above.
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Financial management theory and practice
ISBN: 978-0324422696
12th Edition
Authors: Eugene F. Brigham and Michael C. Ehrhardt
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