Question

Which one of the following statements is TRUE?A. The risk-free rate of return has a risk premium of 1.0.B. The reward for bearing risk is called the standard deviation.C. Risks and expected return are inversely related.D. The higher the expected rate of return, the wider the distribution of returns

Answer 1

Answer:

The correct answer is letter "D": The higher the expected rate of return, the wider the distribution of returns.

Explanation:

The rate of return (RoR) is the earnings an asset generates in excess of its initial cost. The amount is usually expressed as an annualized percentage rate. The RoR estimates grow between two given periods. The spread of the returns directly depends on how high those returns are: the higher, the wider distribution and vice versa.