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15 December, 10:26

According to the definitions given in the text, if Stock A has a standard deviation of 4% and expected returns of 9%, and Stock B has a standard deviation of 3% and returns of 1%, which stock is riskier?

(A) Stock A

(B) Stock B

(C) they are equally risky

(D) cannot determine from the information given

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Answers (1)
  1. 15 December, 11:51
    0
    (A) Stock A

    Explanation:

    A greater standard deviation is interpreted as a volatile stock. The price of the investment changes over time with a broad range, which is undesarible for the management of investment portafolios. There is also a correlation between risk and estimated return, when the commercial activity related with the stock has a stable performance, is commonly secure, and that is the reason why is offered a low rate of return.

    In comparision with the second option, the Stock A has a greater volatility and higher return rate.
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