The coefficient of variation,also known as the risk-to-reward ratio,is defined as:
A)The standard deviation of returns divided by the mean return
B)The variance of return multiplied by the mean return
C)The variance of returns divided by the standard deviation of returns
D)None of the above

Question

Quizplus · Accepted Answer

The coefficient of variation is the ratio of the standard deviation of returns to the mean return. This ratio is used to compare the risk-to-reward profile of different investments or portfolios. Choice A correctly defines the coefficient of variation as the standard deviation of returns divided by the mean return. Therefore, it is the best choice. Choice B incorrectly multiplies the variance of returns by the mean return. Choice C divides the variance of returns by the standard deviation of returns, which is not the coefficient of variation. Choice D is not a valid answer because one of the options must be correct.

The Coefficient of Variation,also Known as the Risk-To-Reward Ratio,is Defined