Asset A has an expected return of 15% and Asset B has an expected return of 12%. Based on a probability distribution, the standard deviation for Asset A is 10% and the standard deviation for Asset B is 5%.
a) Based only on the standard deviation, which investment is less risky? Discuss your reasons for your selection including why you feel that asset is less risky.
b) Calculate the coefficient of variation for each asset and post your answers. Based on the coefficient of variation, which asset is the best asset to invest in? Verify your selection by including a discussion of risk and return for the asset you selected.
c) Provide a discussion of other considerations that should be included that could impact the calculation of the expected return and standard deviation of the assets.