With respect to the probability distribution of returns:
A)a risky stock has a higher probability of producing a return that is substantially closer to the mean of the distribution and a less risky stock has a higher probability of producing a return that is substantially away from the mean of the distribution.
B)high risk implies variability in return such that returns in successive years are likely to be insignificantly different from one another.
C)a less risky stock is likely to produce a return that is close to the mean of the distribution while a more risky stock has a higher probability of producing a return that is substantially away from the mean of the distribution.
D)low risk implies variability in return such that returns in successive years are likely to be considerably different from one another.

Question

Quizplus · Accepted Answer

A less risky stock (such as a bond) is likely to produce a return that is closer to the mean of the probability distribution of returns, while a more risky stock (such as a small-cap stock) has a higher probability of producing a return that is substantially away from the mean of the distribution. This is because higher risk implies greater variability in returns, which increases the likelihood of returns being far from the mean of the distribution.

With Respect to the Probability Distribution of Returns