Analysis Intermediate: Evaluating Risk

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1.
When choosing your investments, look for those that will give you the highest returns for your acceptable level of risk.
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True. This is one of the cornerstones of successful investing.
2.
The problem with standard deviation is that it is difficult to interpret by itself.
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True. That is why the coefficient of variation is used.
3.
A steep standard deviation curve means that _______.
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A securitys deviation is low. When the curve is steep, the deviation is small compared to the height of the curve.
4.
Beta measures the volatility of a security as compared to another security.
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False. Beta measures the volatility of a security as compared to the overall market.
5.
Which of the following does the Capital Asset Pricing Model assume?
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Investors expect rewards for accepting an investments risk. The CAPM assumes that investors expect to be compensated for risk.