Which investment has the least amount of risk? standard deviation = $450, expected return = $4,500 standard deviation = $600, expected return = $400 standard deviation = $500, expected return = $800 standard deviation = $400, expected return = $5,000?

Question

Mathematics

Ralph

13 February, 08:21

Which investment has the least amount of risk? standard deviation = $450, expected return = $4,500 standard deviation = $600, expected return = $400 standard deviation = $500, expected return = $800 standard deviation = $400, expected return = $5,000?

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Answers (1)

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Janet Fletcher · Answer 1

The investment with the highest expected return to standard deviation ratio is the investment with the least risk.

Investment 1: standard deviation = $450, expected return = $4,500

expected return to standard deviation ratio = 4500 / 450 = 10

Investment 2: standard deviation = $600, expected return = $400

expected return to standard deviation ratio = 400 / 600 = 0.67

Investment 3: standard deviation = $500, expected return = $800

expected return to standard deviation ratio = 800 / 500 = 1.6

Investment 4: standard deviation = $400, expected return = $5,000

expected return to standard deviation ratio = 5000 / 400 = 12.5

Therefore, the investment that has the least amount of risk is the invetment with standard deviation = $400, expected return = $5,000