Question

Vincent, the financial manager for NOOB Incorporation, wishes to evaluate three prospective investments: A, B, and C. Vincent will evaluate each of these investments to decide whether they are superior to investments that his company already has in place, which have an expected return of 18% and a standard deviation of 8%. The expected returns and standard deviations of the investments are as follows:

Investment                         Expected return                               Standard deviation

A 25%                                                    9%

B 17                                                        10

C 13                                                        11

If Vincent were risk neutral, which investments would he select?

A. A

B. B

C. C

D. NONE OF THE ABOVE

PAPASAAKO Inc. is considering a capital Budgeting project that has an expected return of 10% and a standard deviation of 40%. What is the project's coefficient of variation

A. 4.0

B. 0.25

C. 2.6

D. 3.0

Answer 1