Asked by Alanna Cooperman on Jun 23, 2024
Verified
Risk is:
A) the probability that return will be less than expected.
B) the standard deviation of the probability distribution of returns.
C) variability in return.
D) All of the above
Standard Deviation
A measure of the amount of variation or dispersion of a set of values, widely used in finance to assess the risk of a financial instrument.
Probability Distribution
An analytical function detailing each potential outcome and its probability for a random variable within a set interval.
Variability
The extent to which data points in a dataset differ from each other and from the mean, often used in statistics.
- Clarify what risk entails in investment scenarios and become familiar with its measurement techniques.
- Identify the types of risks associated with investments and the importance of distinguishing them.
Verified Answer
SA
Shahrzad AbadianJun 24, 2024
Final Answer :
D
Explanation :
All three statements are true definitions of risk. A refers to the possibility of receiving lower returns than expected, B refers to the extent to which returns vary from the expected value, and C refers to the possibility of obtaining different returns over time. Therefore, the correct answer choice is D, "All of the above."
Learning Objectives
- Clarify what risk entails in investment scenarios and become familiar with its measurement techniques.
- Identify the types of risks associated with investments and the importance of distinguishing them.