Which of the following statements about the standard deviation are correct?
I.The standard deviation is a measure of relative dispersion.
II.Standard deviations should be in conjunction with expected returns to compare investments.
III.The standard deviation is calculated by taking the square root of the variance.
IV.The higher the standard deviation of an investment, the lower its risk.
A)I and IV only
B)II and III only
C)I, III and IV only
D)I, II and III only

Question

Quizplus · Accepted Answer

The standard deviation is a measure of absolute dispersion, not relative, so I is incorrect. It is used with expected returns to compare investments, making II correct. It is calculated by taking the square root of the variance, so III is correct. A higher standard deviation indicates higher risk, not lower, so IV is incorrect.

Which of the Following Statements About the Standard Deviation Are