Question

Which one of the following statements concerning the standard deviation is correct?

rev: 07_24_2018_QC_CS-132179

The standard deviation is a measure of total return.

The standard deviation varies in direct relation to increases in dividend yield.

The lower the standard deviation, the less certain the rate of return in any one given year.

The standard deviation is a measure of the total risk.

The higher the standard deviation, the lower the risk.

Answer 1

a)The standard deviation is a measure of volatility and not of total return.Thus statement is not correct about Standard deviation.

b)The standard deviation varies in direct relation to increases in dividend yield.The given statement is incorrect.

c)The higher the standard deviation, the less certain the rate of return in any one given year.Thus given staement is not correct.

d)The standard deviation is a measure of the total risk(Volatility).This statement is correct about standard deviation.

e)The higher the standard deviation,higher the risk.Hence the given statement is not correct.

Thus correct answer is option d i.e The standard deviation is a measure of the total risk.