Question

In: Finance

The table below describes the expected return and the standard deviation of the return for Franchises...

  1. The table below describes the expected return and the standard deviation of the return for Franchises A and B:

    Franchise A ($MM)

    Franchise B ($MM)

    Expected Return

    10

    20

    Standard Deviation

    20

    30

    Franchise A is _____ Franchise B in terms of total risk.

    riskier than

    less risky than

    as risky as

    None of the above

Solutions

Expert Solution

Total risk is measured with SD.

The Project / Franchise with higher SD is more riskier

SD of Franchise A = 20%

SD of Franchise B = 30%

Franchise A is Less riskier than Frachise B.

Option B is correct.


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