Which of the following is correct?
A) Total risk is measured by the standard deviation.
B) There is a positive relationship between risk and return.
C) If you observe a high variability in a stock's returns you can infer that the stock is very risky.
D) All of these choices are correct.

Question

Quizplus · Accepted Answer

All the statements are correct regarding the principles of finance. A) Total risk in finance is indeed measured by the standard deviation of returns, indicating how much the returns on an investment are expected to deviate from the average return. B) There is a fundamental principle in finance that there is a positive relationship between risk and return, meaning that typically, investments with higher risk are expected to offer higher potential returns. C) High variability in a stock's returns is a direct indicator of high risk, as it shows that the stock's returns fluctuate widely, making it less predictable and hence riskier.

Which of the Following Is Correct