The Risk of an Investment as Measured by the Standard

question 39

Multiple Choice

The risk of an investment as measured by the standard deviation reflects

• A)only how much lower than the expected value the actual outcome might be.
• B)both how much lower or how much higher than the expected value the actual outcome might be.
• C)how fair the bet is.
• D)how random the variable being evaluated is.

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Definitions:

Convertible Bonds

Bonds issued by a company that can be exchanged by the holder for a predetermined number of the company's shares.

Common Stock

A type of security that represents ownership in a corporation and entitles its holder to a share of the company's profits through dividends and/or capital appreciation.

Face Value

The nominal value or dollar value stated on a financial instrument, such as a bond or stamp.

Dollar Amount

A monetary value stated in terms of the currency unit of the United States, the dollar.