For two projects of differing sizes, the project that is relatively more risky has the:
A)highest standard deviation.
B)highest expected profit.
C)highest coefficient of variation.
D)lowest coefficient of variation.

Question

Quizplus · Accepted Answer

The coefficient of variation measures the relative risk of a project by calculating the standard deviation as a percentage of the mean. Therefore, the project that is relatively more risky will have a higher coefficient of variation. The other options are not necessarily indicative of relative risk. The coefficient of variation (CV) measures the relative risk of a project, taking into account the project's standard deviation and expected value. The higher the CV, the more risky the project is relative to its expected value. Therefore, for two projects of differing sizes, the project that is relatively more risky will have the highest coefficient of variation.

For Two Projects of Differing Sizes, the Project That Is