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Dmitry [639]
3 years ago
10

A stock has an expected return of 12 percent and a standard deviation of 20 percent. Long term Treasury bonds have an expected r

eturn of 9 percent and a standard deviation of 15 percent. Given this data which of the following statements is correct?
A. Both investments have the same diversifiable risk.
B. The stock investment has a better risk-return trade-off.
C. The bond investment has a better risk-return trade-off.
D. The two assets have the same coefficient of variation.
Business
1 answer:
madreJ [45]3 years ago
4 0

Answer:

D. The two assets have the same coefficient of variation.

Explanation:

the coefficient of variation = standard deviation / mean

  • the coefficient of variation of the stock = 20% / 12% = 1.67
  • the coefficient of variation of the treasury bonds = 15% / 9% = 1.67

As a general, the lower the coefficient of variation, the more exact is the estimated return.

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Read 2 more answers
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