Given the following expected returns and standard deviations of assets B, M, Q, and D, which asset should the prudent financial manager select?
A) Asset B
B) Asset M
C) Asset Q
D) Asset D

Question

Given the following expected returns and standard deviations of assets B, M, Q, and D, which asset should the prudent financial manager select? 
A) Asset B 
B) Asset M 
C) Asset Q 
D) Asset D

Quizplus · Accepted Answer

Asset B has the highest expected return (12%) and the lowest standard deviation (6%), which means it offers the best risk-return tradeoff compared to the other assets. A prudent financial manager would choose Asset B as it provides the highest potential return for a given level of risk.

Given the Following Expected Returns and Standard Deviations of Assets