An investor plans to invest in a stock in such a way that if the stock value

Question:

An investor plans to invest in a stock in such a way that if the stock value increases the investor will earn money and if the stock value decreases the investor will lose money. The more the stock value changes, the more money the investor will earn or lose. The investor is trying to decide between investing in a certain small-cap stock and a certain blue-chip stock. Both currently have the same value. Typically, the daily values of a small-cap stock have greater standard deviation than the daily values of a blue-chip stock.
a. Which stock has higher risk? Explain.
b. Even though the stock you found in part (a) has higher risk, some investors still choose to invest in that type of stock. Why? Stocks
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