Which of the Following Statements Is/are True About the Variance

question 308

Multiple Choice

Which of the following statements is/are true about the variance of the possible future returns on a financial asset?

• A) The standard deviation of the possible returns on an asset is equal to the square root of the variance of the possible returns.
• B) Low-variance securities are high-standard deviation securities.
• C) The variance and the standard deviation of the possible returns on a risk-free asset are negative.
• D) Standard deviation of returns can be computed without considering probabilities, but variance cannot.
• E) All else equal, assets with high average returns will also have high standard deviations relative to those with lower returns.

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Definitions:

Southern Hemisphere

The half of Earth that lies south of the Equator, encompassing continents like Australia, Antarctica, and parts of Africa, South America, and Asia.

Appalachian Mountains

A mountain range in Eastern North America, extending from the Canadian province of Newfoundland and Labrador to central Alabama in the United States.

Canadian Shield

A vast area of mostly crystalline rocks exposed in the eastern half of Canada and the Great Lakes region of the United States.

Precambrian

The era in Earth's history before the Cambrian Period, representing the time from the planet's formation to 541 million years ago.