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 coefficient of variation divides a securitys price mean by its standard deviation.
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False. The coefficient of variation divides a securitys standard deviation by its price mean.
3.
The degree to which a securitys price moves up and down is known as its volatility.
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True. Volatility refers to how much the price fluctuates.
4.
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.
5.
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.