Martha is looking into investing a portion of her recent bonus into the stock ma

Question

Martha is looking into investing a portion of her recent bonus into the stock market. While researching different companies, she discovers the following standard deviations of one year of daily stock closing prices.

Eye Remember Enterprises:

Standard deviation of stock prices

The Azure Travel Company:

Standard deviation of stock prices

Based on the data and assuming these trends continue, which company would give Martha a stable long-term investment?

A. The Azure Travel Company; the larger standard deviation indicates that The Azure Travel Company has less variability in its closing prices than Eye Remember Enterprises.

B. Eye Remember Enterprises; the smaller standard deviation indicates that Eye Remember Enterprises has less variability in its closing prices than The Azure Travel Company.

C. Eye Remember Enterprises; the smaller standard deviation indicates that Eye Remember Enterprises has a greater mean closing price than The Azure Travel Company.

D. The Azure Travel Company; the larger standard deviation indicates that The Azure Travel Company has a greater mean closing price than Eye Remember Enterprises.

Eye Remember Enterprises:

Standard deviation of stock prices

The Azure Travel Company:

Standard deviation of stock prices

Explanation / Answer

Solution:-

(B.) Eye Remember Enterprises; the smaller standard deviation indicates that Eye Remember Enterprises has less variability in its closing prices than The Azure Travel Company.

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