The Standard Deviation of a Risk-Free Asset Is

question 50

Multiple Choice

The standard deviation of a risk-free asset is:

• A)1
• B)0
• C)-1
• D)Any number between -1 and 1

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Definitions:

Certificates of Deposit

Certificates of Deposit (CDs) are financial products offered by banks that provide a fixed interest rate in exchange for keeping a deposit untouched for a predefined period.

Maturity Date

The specific date on which the principal amount of a bond, loan, or other financial instrument is to be paid back in full to the investor.

Tax Bracket

A range of income taxed at a specific rate by the government, part of a progressive tax system.

Corporate Bond

A debt security issued by a corporation and sold to investors, paying fixed interest over its lifetime and repaying the principal at the bond’s maturity date.