a) Which of the following statements is incorrect? The tighter the probability d
ID: 2816068 • Letter: A
Question
a)
Which of the following statements is incorrect?
The tighter the probability distribution of expected future returns, the smaller the risk of a given investment as measured by the standard deviation.
When investors require higher rates of return for investments that demonstrate higher variability of returns, this is evidence of risk aversion.
A stock with above-average market risk will tend to be more volatile than an average stock, and it will definitely have a beta which is greater than 1.0.
A stock's beta is more relevant as a measure of risk to an investor with a well-diversified portfolio than to an investor who holds only one stock.
b) The _________, calculated as the standard deviation divided by the expected return, is a standardized measure of the risk per unit of expected return.
The tighter the probability distribution of expected future returns, the smaller the risk of a given investment as measured by the standard deviation.
When investors require higher rates of return for investments that demonstrate higher variability of returns, this is evidence of risk aversion.
A stock with above-average market risk will tend to be more volatile than an average stock, and it will definitely have a beta which is greater than 1.0.
A stock's beta is more relevant as a measure of risk to an investor with a well-diversified portfolio than to an investor who holds only one stock.
b) The _________, calculated as the standard deviation divided by the expected return, is a standardized measure of the risk per unit of expected return.
Explanation / Answer
Hello Sir/ Mam
(a) In the multiple choice question, I can't find anyone of the 4 options to be incorrect. All of the 4 options are correct.
(b) Coefficient of Variance
I hope this solves your doubt.
Feel free to comment if you still have any query.
Do give a thumbs up if you find this helpful.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.