When Ranking the Riskiness of Securities Using the Standard Deviation

question 1

Multiple Choice

When ranking the riskiness of securities using the standard deviation, the highest risk security to the lowest risk security is as follows:

• A)Small stocks, large stocks, long-term government bonds, U.S. treasury bills.
• B)Long-term government bonds, small stocks, large stocks, U.S. treasury bills.
• C)Large stocks, small stocks, long-term government bonds, U.S. treasury bills.
• D)Small stocks, long-term government bonds, large stocks, U.S. treasury bills.
• E)U.S. treasury bills, long-term government bonds, large stocks, small stocks.

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Definitions:

Consolidated Expenses

The total expenses of a group of companies after eliminating intercompany transactions, reported in consolidated financial statements.

Fair Value

An estimate of the price at which an asset or liability could be traded in a fair transaction between willing parties, other than in a forced or liquidation sale.

Additional Paid-In Capital

Additional Paid-In Capital (APIC) is the amount of money that investors have paid for shares above their nominal value during public offerings, reflecting capital that a company receives in excess of the par value of its stock.

Business Combination

A business combination occurs when two or more businesses merge or when one business acquires another, resulting in the consolidation of assets and liabilities under one entity.