Analysis Intermediate: Evaluating Risk

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1.
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.
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.
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.
4.
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.
5.
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.