Question

The larger the standard deviation of returns of an investment, _____. a. ​lesser is the chance that the realized return will differ significantly from the expected return b. ​greater is the chance that the realized return will be negative c. ​greater is the chance that the realized return will differ significantly from the expected return d. ​lesser is the chance that the realized return will be negative e. ​greater is the chance that the investment will outperform the market

Answer 1

Answer:

c. ​greater is the chance that the realized return will differ significantly from the expected return

Explanation:

The standard deviation is used as a measure of risk, it measures the dispersion of data relative to its mean. The expected return is measured by the mean, therefore if the standard deviation is large it will be more difficult to be accurate calculating the expected return as the values can differ significantly.