Rank the following three stocks by their riskreturn relation

Rank the following three stocks by their risk-return relationship, best to worst. Rail Haul has an average return of 8 percent and standard deviation of 33 percent. The average return and standard deviation of Idol Staff are 11 percent and 40 percent; and of Poker-R-Us are 5 percent and 25 percent. Rank Stock 1 2 3

Solution

Rail Haul risk return ratio = 33/8 = 4.13............2

Idol staff risk return ratio = 40/11 = 3.64.............1

Poker R Us risk return ratio = 25/5 = 5.............3