CFA Practice Question

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CFA Practice Question

The ______ the standard deviation, the ______ the risk and correspondingly the lower the required return.

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
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