The larger the standard deviation of returns on an investment, the _____.
A)greater the chance that it will provide regular return to its investors
B)lower the chance that its realized return will be negative
C)greater the chance that its realized return will be equal to its expected return
D)lower the chance that its expected return will differ significantly from its market return
E)greater the chance that its realized return will differ significantly from its expected return

Question

The larger the standard deviation of returns on an investment, the _____. 
A)greater the chance that it will provide regular return to its investors
B)lower the chance that its realized return will be negative
C)greater the chance that its realized return will be equal to its expected return
D)lower the chance that its expected return will differ significantly from its market return
E)greater the chance that its realized return will differ significantly from its expected return

Quizplus · Accepted Answer

A larger standard deviation of returns indicates a greater variability in the returns, and hence a greater chance that the realized return will differ significantly from the expected return. This increases the risk associated with the investment, as investors may not receive the returns they were anticipating.

The Larger the Standard Deviation of Returns on an Investment