Analysis Intermediate: Evaluating Risk

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1.
If a security has a high standard deviation, its volatility is low.
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False. If a security has a high standard deviation, its volatility is high.
2.
If you are willing to accept heavy losses in your portfolio to gain high returns later on, you are risk-averse.
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False. If you are willing to accept heavy losses in your portfolio to gain high returns later on, you have a high tolerance for risk.
3.
A security with a high coefficient of variation is highly volatile.
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True. A security with a high coefficient of variation is highly volatile.
4.
The lower the risk of an investment, the higher its expected return.
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False. The lower the risk of an investment, the lower its expected return. To get high returns, you must accept greater risk.
5.
If a security is more volatile than the market, it has a beta _______.
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Greater than 1. A beta greater than 1 indicates that a stock is more volatile than the overall market.