EV

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August 22, 2020 at 4:05 pm #581528
agnes222
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Dear John Sir,

Which ONE of the following statements is true, if a decision is made using expected values?
A The risk is minimised for a set level of return
B The risk is minimised irrespective of the level of return
C The return is maximised for a given level of risk
D The return is maximised irrespective of the level of risk

Sir would you mind explaining why the answer is D to this question?
August 22, 2020 at 4:16 pm #581531
John Moffat
Keymaster
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I think it should be clear that we are maximising rather than minimising the return.

As I explain in my free lectures on this, expected values take no account of risk.
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