In choosing between two investments, if one has the higher expected return but the other has the lower standard deviation, we use another measure of risk called . To obtain this measure we divide the by the . This measure shows the amount of per unit of return and provides a more useful risk measure when the expected returns on two alternatives are different.

The kamp family has twins, rob and rachel. both rob and rachel graduated from college 2 years ago, and each is now earning $50,000 per year. rachel works in the retail industry, where the mean salary for executives with less than 5 years' experience is $35,000 with a standard deviation of $8,000. rob is an engineer. the mean salary for engineers with less than 5 years' experience is $60,000 with a standard deviation of $5,000.