1.Why is it important to consider standard deviation, and not just the mean (average), when deciding whether to buy a specific investment? 2.Describe the Empirical Rule. Why is the Empirical Rule important to our understanding of an investment's behavior? 3.Suppose you are trying to decide between two investments: Investment A has an average annual rate of return of 10% with a standard deviation of 20%. Investment B has an average annual rate of return of 3% with a standard deviation of 4%. Which investment would you prefer? Explain your decision by discussing the Empirical Rule and also other factors, for example, your appetite for risk, your short-term and long-term goals, and anything you may already know about the financial markets.
1.Why is it important to consider standard deviation, and not just the mean (average), when deciding whether to buy a specific investment?
2.Describe the Empirical Rule. Why is the Empirical Rule important to our
understanding of an investment's behavior?
3.Suppose you are trying to decide between two investments: Investment A has an average annual rate of return of 10% with a standard deviation of 20%.
Investment B has an average annual rate of return of 3% with a standard
deviation of 4%. Which investment would you prefer? Explain your decision by discussing the Empirical Rule and also other factors, for example, your
appetite for risk, your short-term and long-term goals, and anything you may already know about the financial markets.