Analysis Intermediate: Evaluating Risk

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1.
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.
2.
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.
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.
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.
5.
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.