Company A has an expected return of 5% and standard deviation of 5%. Company B has an expected return of 25% and standard deviation of 15%. Which one should a rational investor dchoose? O k depends on the person's tolerance for risk O Company A Company B They are indifferent Neither of them

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A: An estimation by marginal investor , a higher expected return is earned on more risky securities.

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A: Risk measures can be used  to perform  risk assessment.

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Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.