Assume that two investment opportunities have identical expected values of $100,000. Investment A has a variance of 25,000, while investment B’s variance is 10,000. We would expect most investors (who dislike risk) to prefer investment opportunity
A. A because it has less risk.
B. A because it provides higher potential earnings.
C. B because it has less risk.
D. B because of its higher potential earnings.
Answer:C
Assume that two investment opportunities have identical expected values of $100,000. Investment A has a variance of 25,000, while investment B’s variance is 10,000. We would expect most investors (who dislike risk) to prefer investment opportunity
A. A because it has less risk. B. A because it provides higher potential earnings. C. B because it has less risk. D. B because of its higher potential earnings.