According to finance theory a rational investor is assumed to focus on ______________ when making investment decisions?
A)Expected return and mean returns
B)Expected risk and standard deviation of returns
C)Expected risk and total risk
D)Expected return and standard deviation of returns

Question

Quizplus · Accepted Answer

Finance theory assumes that rational investors focus on both the expected return and the standard deviation of returns when making investment decisions. This is because expected return indicates the potential gain from the investment, while the standard deviation of returns measures the level of risk associated with the investment. A rational investor seeks to maximize expected return while minimizing risk, making the combination of these two factors crucial in investment decision-making.

According to Finance Theory a Rational Investor Is Assumed to Focus