The risk level of Eliza's Investment is that it has a low standard deviation. To make the investment less risky is to withdraw from it.
<h3>Evaluation of risk levels of an investment</h3>
The evaluation of risk levels in an investment can be done to ascertain whether to continue in an investment or to withdraw.
The methods that can be used to evaluate risk levels in an investment include the following:
- standard deviation, and Sharpe ratio.
The risk level of Eliza's Investment can be evaluated using the standard deviation method.
The price invested = $15,000 (p)
Time = 10 years
Rate = 8%
Therefore, the interest generated= 15,000 × 10×8 /100
= 1200000/100
= $12,000
Therefore in every year the interest of the investment she made will yeild only 12,000/10 = $1,200
The standard deviation is low because the rate of returns is low.
To avoid further risks, Eliza should withdraw from the investment because the rate of returns from the investment is too low.
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