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.
A steep standard deviation curve means that _______.
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A securitys deviation is low. When the curve is steep, the deviation is small compared to the height of the curve.
3.
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.
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.
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.