Consider two investments: Investment 1 has a 50% chance of producing a return of zero and a 50% chance of producing a return of 40%
Investment 2 has a 50% chance of producing a return of 10% and a 50% chance of producing a return of 30%
Which of the following statements regarding the investments is TRUE?
A)Investment 1 is riskier than Investment 2
B)Investment 2 is riskier than Investment 1
C)Investment 1 and Investment 2 have the same amount of risk
D)Investment 1 is a better investment because it has the potential to produce the highest returns

Question

Quizplus · Accepted Answer

Investment 1 is riskier than Investment 2 because it has a 50% chance of producing a return of zero, which means there's a significant chance of not getting any return at all, whereas Investment 2 offers a return in both scenarios, making it less risky.

Consider Two Investments: Investment 1 Has a 50% Chance of Producing