Question

Which of the following statements is FALSE? The variance increases with the magnitude of the deviations from the mean. The variance is the expected squared deviation from the mean. Two common measures of the risk of a probability distribution are its variance and standard deviation. If the return is riskless and never deviates from its mean, the variance is equal to one.

Answer 1

Answer:

FALSE: If the return is riskless and never deviates from its mean, the variance is equal to one.

Explanation:

If the return is riskless and never deviates from its mean, the variance is equal to ZERO.

Variance is calculated by taking the sum of square of deviations from the mean.

Deviations is calculated by subtracting the returns from their mean.

If the return is riskless and never deviates from its mean, the deviations would always be zero, hence the sum of square of them (variance) would also be zero.