A company has two investment options, Option A and Option B. The probability of a positive return for Option A is 0.6 and for Option B it is 0.4. The expected return of Option A is 8% and that of Option B is 12%. The standard deviation of the returns for Option A and Option B are 10% and 15%, respectively. Determine which investment is riskier based on the coefficient of variation. Also, determine which investment has a higher risk premium.

Answer rating: 100% (QA)

The detailed answer for the above question is provided below To determine which investment is riskie... View the full answer