Analysis Intermediate: Evaluating Risk

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1.
In the CAPM formula, Rf stands for _______.
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Risk-free return. In the CAPM formula, Rf stands for risk-free return.
2.
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.
3.
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.
4.
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.
5.
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.