Answer: Coefficient of variation.

## Explanation The **Coefficient of Variation (CV)** is the correct answer because it measures risk per unit of mean return. ### Key Concepts: 1. **Coefficient of Variation (CV)**: - Formula: CV = Standard Deviation / Mean Return - Measures risk (standard deviation) relative to the mean return - Lower CV indicates better risk-adjusted return - Expresses risk per unit of return 2. **Sharpe Ratio**: - Formula: (Portfolio Return - Risk-Free Rate) / Standard Deviation - Measures excess return per unit of risk - Uses risk-free rate as benchmark - Not exactly "risk per unit of mean return" but "excess return per unit of risk" 3. **Standard Deviation**: - Measures total risk or volatility - Does not consider return at all - Only measures dispersion of returns ### Why Coefficient of Variation is Best: - The question specifically asks for "risk per unit of mean return" - CV directly calculates standard deviation divided by mean return - It normalizes risk by the average return level - Allows comparison of risk-adjusted performance across different return levels ### Example: If Portfolio A has mean return of 10% and standard deviation of 15%: CV = 15%/10% = 1.5 If Portfolio B has mean return of 8% and standard deviation of 12%: CV = 12%/8% = 1.5 Both have the same risk per unit of return despite different absolute risk levels. **Answer: C - Coefficient of variation**

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