- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 1. Portfolio Risk and Return: Part I
- Subject 4. Portfolio Risk, Return and Diversification
CFA Practice Question
The distribution of a high-risk stock would tend to be ______.
B. normal
C. skewed
D. flat
E. lognormal
A. peaked
B. normal
C. skewed
D. flat
E. lognormal
Correct Answer: D
A flat distribution means that there is a wide set of possible outcomes and the most risk.
User Contributed Comments 10
| User | Comment |
|---|---|
| myanmar | i thougt it would be peaked because of fat tailes |
| akanimo | peaked cant be right because that means that the majority of the area under the curve will be at a central point and the tails would be very thin (low probabilities) ... this would point more to low volatility which is low risk |
| alki | risky stock means higher stnd deviation, higher the deviation from the mean, flatter the distribution |
| fahad | Good one Alki |
| BigJimStud | more peaked = less distribution from the mean more flat = more distribution away from the mean |
| loisliu88 | what about skewed. |
| bantoo | It is really a very smart question. |
| johntan1979 | Very easy to understand if you can imagine flat distribution as the possibility of getting -100% to +infinity returns ==> super high risk. |
| jonan203 | ie. platykurtic |
| Fraser1997 | A way I remember is if you had zero risk and expected return is 15% then the graph would be a vertical line at 15%. So as it gets fatter and shorter means more risk until you have a completely horizontal line. Its not perfect but I find it an easy way to remember. |