All else held constant,as the variance of a payoff increases,the
A) expected value of the payoff increases.
B) risk of the payoff increases.
C) expected value of the payoff decreases.
D) risk of the payoff decreases.

Question

Quizplus · Accepted Answer

Variance is a measure of dispersion or spread of the values in a distribution. Therefore, as the variance of a payoff increases, it indicates a greater possibility of the actual returns deviating from the expected value. This increases the risk associated with the payoff. As a result, option B is correct.

All Else Held Constant,as the Variance of a Payoff Increases,the