Which of the Following Measures of Risk Best Highlights the Potential

question 16

Multiple Choice

Which of the following measures of risk best highlights the potential loss from extreme negative returns?

• A)Standard deviation
• B)Variance
• C)Upper partial standard deviation
• D)Value at risk (VaR)

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Definitions:

Incorporated

The process of legally declaring a corporate entity separate from its owners, providing protection from personal liability and other benefits.

Debt Securities

Financial instruments representing money borrowed that must be repaid, such as bonds or notes.

Bonds

Financial instruments representing a loan made by an investor to a borrower, typically corporations or governmental entities, which pays back with interest.

Corporation

A legal entity recognized by law as separate from its owners, with its own rights, responsibilities, and liabilities.