Analysis Intermediate: Evaluating Risk

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1.
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.
2.
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.
3.
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.
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 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.