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Using Standard Deviations, Which Bank Is in a Better Position

Question 69

Multiple Choice

Using standard deviations, which bank is in a better position if the average earnings on the assets of Bank A is 11 percent and Bank B is 12 percent (ignore all other factors) ?

A) Bank B, because its earnings of 12 percent is higher than Bank A's 11 percent while, its standard deviation is lower.
B) Bank B, because its earnings of 12 percent is higher compared to Bank A's 11 percent, while its standard deviation is higher.
C) Bank B, because its earnings of 12 percent is higher compared to Bank A's 11 percent, while its standard deviation is the same.
D) Bank A, because although its earnings of 11 percent is lower compared to Bank B's 12 percent, its standard deviation is significantly lower.
E) Bank A, because although its earnings of 11 percent is lower compared to Bank B's 12 percent, its standard deviation is the same. [Refer to: 11-66]

Correct Answer: