Question

Which of these is a measure of risk to reward earned by an investment over a specific period of time?

A. Coefficient of variation
B. Market deviation
C. Standard deviation
D. Total variation

Answer 1

The Coefficient of variation is the measure that best represents the risk to reward ratio for an investment over a specific time period.

Step-by-step explanation:

Among the options provided, the measure risk to reward earned by an investment over a specific period of time is best represented by the Coefficient of variation (Option A). The coefficient of variation is calculated by dividing the standard deviation of the investment's returns by the mean (expected value) of those returns.

This statistic provides information on the degree of variability in relation to the average return, thus reflecting risk in comparison to the potential reward. Option B, Market deviation, is not a commonly used term in this context. Option C, Standard deviation, measures the variability of returns, but does not directly relate it to the reward. Lastly, Option D, Total variation, is a broad term, and not one that specifically measures risk to reward ratio.

Answer 2

The correct answer is A. Coefficient of variation.

Step-by-step explanation:

Coefficient of variation is the risk of an asset or portfolio per unit of return.

Coefficient of variation = Standard deviation/ Return

Lower the coefficient, better it is.

If portfolio have same return but different risk or same risk but different return then inventor will prefer portfolio with

• higest return at a given level of risk or
• Lowest risk at given level of return

If portfolio have different returns with different risks, then protfolio with lower coefficient of variation is preferred.