Question

Rank the following three stocks by their level of total risk, highest to lowest. Rail Haul has an average return of 12 percent and standard deviation of 25 percent. The average return and standard deviation of Idol Staff are 15 percent and 35 percent; and of Poker-R-Us are 9 percent and 20 percent

Answer 1

Answer:

Idol Staff, Rail Haul, Poker-R-Us

Explanation:

The standard deviation of a stock is a measure of the volatility of the stock or simply put, a measure of risk of the stock.

The idea of using standard deviation as a measure of stock risk is in the relation of the stock to its returns.

The farther the standard deviation is from the revenue, the more risky or at risk the stock is.

From the above question, Idol staff has the highest level of risk of 20% (i.e 35-15). Next up is Rail Haul with a risk level of 13% (i.e 25-12). the stock with tthe lowest risk level is Poker-R-Us with 11% (i.e 20-9).

Cheers.