5. Risk and return Suppose an investor is considering the assets in the following table. She has information on their average expected returns but not their risk levels. Assist her by ranking the assets' risk levels from 1 to 4, where 1 denotes the least risky asset and 4 denotes the most risky asset. Enter these ranks in the Risk Level column of the table. Asset Risk Level Average Expected Return A 18% B 25% C 7% D 33% Which one of the following best describes a risk-free asset? Its rate of return is zero It is more useful than cash Its rate of return is nearly always positive It is the best possible asset for investment purposes
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A risk-free asset is an investment that has no chance of losing its value and has a guaranteed rate of return. In other words, it is an asset with no risk involved. Looking at the table, we can see that the assets are ranked based on their risk level. The asset Show more…
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