When comparing two equal-sized investments, the ____ is an appropriate measure of total risk.
A) standard deviation
B) coefficient of variation
C) correlation
D) disjointed variance

Question

Quizplus · Accepted Answer

Standard deviation is a measure of the total risk of an investment. It measures the dispersion of returns around the average return, and provides an indication of the volatility of the investment. The higher the standard deviation, the greater the risk. Therefore, when comparing two equal-sized investments, the one with a higher standard deviation is considered to be riskier. The coefficient of variation is also a valid measure of risk, but it is calculated as the ratio of the standard deviation to the expected return, and is more appropriate when comparing investments with different expected returns. Correlation and disjointed variance are not appropriate measures of total risk.

When Comparing Two Equal-Sized Investments, the ____ Is an Appropriate