The standard deviation of returns of ________.
I. small stocks is higher than that of large stocks
II. large stocks is lower than that of corporate bonds
III. corporate bonds is higher than that of Treasury bills
Which statement is true?
A) I and III
B) I, II, and III
C) I and II
D) I only

Question

Quizplus · Accepted Answer

Small stocks are considered riskier investments than large stocks, so they tend to have higher volatility, which translates into a higher standard deviation. Similarly, corporate bonds are riskier than Treasury bills, so they tend to have higher volatility and a higher standard deviation of returns. Therefore, statements I and III are true. Statement II comparing large stocks to corporate bonds is not necessarily true in all cases, as it may depend on the specific stocks and bonds being compared.

The Standard Deviation of Returns of ________