SCENARIO 19-3
The following information is from 2 investment opportunities. $\begin{array}{lrr}
&\text { A}&\text {B}\
\text { Expected monetary value } & \$ 900 & \$ 600 \
\text { Standard deviation } & 100 & 50
\end{array}$
-Referring to Scenario 19-3, which investment has the optimal coefficient of variation?
A) Investment A
B) Investment B
C) The investments are equal.
D) It cannot be determined.

Question

Quizplus · Accepted Answer

The coefficient of variation (CV) is calculated as the standard deviation divided by the expected monetary value. For Investment A, CV = 100/900 = 0.111. For Investment B, CV = 50/600 = 0.083. Investment B has a lower CV, indicating it has less risk per unit of return, making it the optimal choice.