Which of the Following Statements Are Correct Concerning the Variance

question 7

Multiple Choice

Which of the following statements are correct concerning the variance of the annual returns on an investment?
I. The larger the variance,the more the actual returns tend to differ from the average return.
II. The larger the variance,the larger the standard deviation.
III. The larger the variance,the greater the risk of the investment.
IV. The larger the variance,the higher the expected return.

• A) I and III only
• B) II, III, and IV only
• C) I, III, and IV only
• D) I, II, and III only
• E) I, II, III, and IV

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Definitions:

Mean

The average of a set of numbers, calculated by dividing the sum of these numbers by the count of the numbers.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how much the values in the data set differ from the mean.

Standard Normal Random Variable

A random variable with a mean of 0 and a standard deviation of 1 under the normal distribution.

Probability

Refers to the degree of certainty associated with the occurrence of a specific outcome in a random event.