- 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 ______ the standard deviation, the ______ the risk and correspondingly the lower the required return.
B. lower; higher
C. higher; lower
D. higher; higher
E. Both A & D are correct.
A. lower; lower
B. lower; higher
C. higher; lower
D. higher; higher
E. Both A & D are correct.
Correct Answer: A
Uncertainty concerning the outcome of an investment or other situation is often defined as the variability of returns from an investment. The greater the range of possible outcomes, the greater the risk.
User Contributed Comments 4
| User | Comment |
|---|---|
| PedroEdmundo | That' what the CAPM, the SML and the CML about... risk-return relationship: higher return higher risk, lower risk lower return, at least expected |
| soarer1 | Why not D too? |
| chamad | because the higher the risk, the higher the required return. So D is incorrect. |
| jonan203 | read the question carefully, "corresponding the lower" is not true for D |