Which one of the following statements is correct?
A)The standard deviation of the returns on Treasury bills is zero.
B)Large-company stocks are historically riskier than small-company stocks.
C)The standard deviation is a means of measuring the volatility of returns on an investment.
D)A risky asset will always have a higher annual rate of return than a riskless asset.
E)There is an indirect relationship between risk and return.

Question

Quizplus · Accepted Answer

The standard deviation measures the volatility or variability of returns on an investment. Option A is incorrect as no investment can have zero standard deviation. Option B is incorrect as historically, small-company stocks are considered riskier than large-company stocks. Option D is incorrect as a risky asset may or may not have a higher annual rate of return than a riskless asset. Option E is also incorrect as there is a positive relationship between risk and return, meaning higher risk investments offer higher potential returns.

Which One of the Following Statements Is Correct