Analysis Intermediate: Evaluating Risk

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1.
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.
2.
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.
3.
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.
4.
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.
5.
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.