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IMANET CMA Exam - Topic 7 Question 129 Discussion

The expected rate of return for the stock of Cornhusker Enterprises is 20%, with a standard deviation of 1 5%.The expected rate of return for the stock of Mustang Associates is 10%, with a standard deviation of 9%.The riskier stock is
D) Mustang because the coefficient of variation is higher.
A) Cornhusker because the return is higher.
B) Cornhusker because the standard deviation is higher.
C) Mustang because the standard deviation is higher.

IMANET CMA Exam - Topic 7 Question 129 Discussion

Actual exam question for IMANET's CMA exam
Question #: 129
Topic #: 7
[All CMA Questions]

The expected rate of return for the stock of Cornhusker Enterprises is 20%, with a standard deviation of 1 5%.The expected rate of return for the stock of Mustang Associates is 10%, with a standard deviation of 9%.The riskier stock is

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Suggested Answer: D

The coefficient of variation is useful when the rates of return and standard deviations of two investments differ. It measures the risk per unit of return because it divides the standard deviation by the expected return. The coefficient of variation is much higher for Mustang_(0.910 = .9) than for Cornhusker (.15.20 = .75).


by Lillian at Jul 02, 2026, 11:11 PM

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