If Investors Are Risk Averse and Hold Only One Stock

question 12

True/False

If investors are risk averse and hold only one stock, we can conclude that the required rate of return on a stock whose standard deviation is 0.21 will be greater than the required return on a stock whose standard deviation is 0.10.However, if stocks are held in portfolios, it is possible that the required return could be higher on the low standard deviation stock.

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Definitions:

Gestural Language

A form of non-verbal communication using movements of the hands, arms, or body to convey messages.

Auditory Contact

The perception of sounds by the ear or the psychological connection and communication established through hearing.

Basic Language Skills

Fundamental linguistic abilities involving reading, writing, listening, and speaking that enable communication and comprehension.

Read Lips

The ability to understand spoken words by visually interpreting the movements of the lips, face, and tongue, often used by individuals who are deaf or hard of hearing.