According to the mean-variance criterion, which one of the following investments dominates all others?
A) E(r) = 0.15; Variance = 0.20
B) E(r) = 0.10; Variance = 0.20
C) E(r) = 0.10; Variance = 0.25
D) E(r) = 0.15; Variance = 0.25
E) None of these options dominates the other alternatives.

Question

Quizplus · Accepted Answer

According to the mean-variance criterion, an investment dominates others if it has a higher expected return (E(r)) for the same or lower variance, or if it has the same expected return but a lower variance. Option A has the highest expected return (0.15) with a variance (0.20) that is not exceeded by any option with the same or higher expected return, making it the dominant choice.

According to the Mean-Variance Criterion, Which One of the Following