Which of the following statements is most accurate?
A) A dominated investment is desirable.
B) Dominated investments are rare.
C) A safe security with the same expected return as a riskier security dominates the riskier security.
D) An investor should only purchase a dominated stock.

Question

Quizplus · Accepted Answer

A dominated investment is one that offers lower expected returns for the same level of risk or higher risk for the same level of expected returns as another investment. Therefore, a safe security with the same expected return as a riskier security is more desirable because it dominates the riskier security by offering the same return with less risk.

Which of the Following Statements Is Most Accurate