When we compare the risk of two investments that have the same expected return, the coefficient of variation:
A) Adjusts for the correlation between the two instruments.
B) Provides no additional information when compared with the standard deviation.
C) Gives conflicting results compared to the standard deviation.
D) Always gives us a value between 0 and 1.

Question

Quizplus · Accepted Answer

The coefficient of variation standardizes the risk (standard deviation) relative to the expected return, offering a measure of risk per unit of return. This provides additional insight compared to using standard deviation alone, which does not account for the scale of the investment's return.

When We Compare the Risk of Two Investments That Have