For a potential investment of $5,000,a portfolio has an expected monetary value (EMV)of $1,000 and a standard deviation of $100.The return to risk ratio (RTRR)is
A)5.
B)10.
C)20.
D)50.

Question

Quizplus · Accepted Answer

The Return to Risk Ratio (RTRR) is calculated by dividing the Expected Monetary Value (EMV) by the standard deviation. 
RTRR = EMV/Standard Deviation 
RTRR = 1000/100 
RTRR = 10

A higher RTRR indicates a better return for the level of risk taken. The standard deviation measures the volatility of the portfolio, which means a higher standard deviation indicates higher risk. Therefore, a higher RTRR is better as it indicates that the portfolio is generating higher returns for the same level of risk.

Out of the given choices, option B has the highest RTRR (10), which means it is the best choice for an investment with $5,000.

For a Potential Investment of $5,000,a Portfolio Has an Expected