Q:

Explain why standard deviation may not be an entirely appropriate measure of risk for purposes of this comparison. ​ (Select the best answer​ below.) A. The standard deviation measure fails to take into account both the volatility and the return of the investment. Investors would prefer lower return but higher​ volatility, and the coefficient of variation provides a measure that takes into account both aspects of​ investors' preferences. B. The standard deviation measure fails to take into account both the​ risk-free rate and the return of the investment. Investors would prefer higher return but less​ volatility, and the coefficient of variation provides a measure that takes into account both aspects of​ investors' preferences. C. The standard deviation measure fails to take into account both the volatility and the return of the investment. Investors would prefer higher return but less​ volatility, and the coefficient of variation provides a measure that takes into account both aspects of​ investors' preferences. D. The standard deviation measure fails to take into account both the volatility and the​ risk-free rate. Investors would prefer higher return but less​ volatility, and the coefficient of variation provides a measure that takes into account both aspects of​ investors' preferences.

Accepted Solution

A:
Answer and ExplanationThe correct answer is option CC. The standard deviation measure fails to take into account both the volatility and the return of the investment. Investors would prefer higher return but less​ volatility, and the coefficient of variation provides a measure that takes into account both aspects of​ investors' preferences.