Risk per Unit of Expected Return

B

The correct answer is B. Coefficient of variation.

The coefficient of variation (CV) is a statistical measure that expresses the amount of risk associated with an investment relative to the amount of expected return. The formula for CV is:

CV = (standard deviation / expected return) x 100%

The standard deviation measures the dispersion of returns around the mean or expected return, and the expected return is the average return that an investor anticipates to earn on an investment. Therefore, the CV provides a measure of the risk per unit of expected return, which is useful in comparing the risk-return profiles of different investments.

The higher the CV, the greater the risk per unit of expected return. Conversely, a lower CV indicates lower risk per unit of expected return. Thus, an investor can use the CV to identify investments that offer a higher potential return for the same level of risk, or investments that offer a lower risk for the same level of return.

Standard deviation (A), correlation coefficient (C), and beta (D) are all measures of risk, but they do not explicitly take into account the level of expected return. Standard deviation measures the volatility of an investment's returns, but does not relate it to expected return. Correlation coefficient measures the degree to which two assets move together, but does not provide information on expected return or risk per unit of expected return. Beta measures an investment's volatility relative to the market, but again, does not provide information on risk per unit of expected return.