Explain the difference in the two main measures of risk: the standard deviation and the beta
What will be an ideal response?
Answer: It is best to use the standard deviation when describing the risk of an isolated stock or even a portfolio that is not well-diversified. It is best to use the beta of a stock to describe its risk when it is not isolated but is instead a part of a well-diversified portfolio. When it is mixed with other stocks, its fluctuations will cancel out some of the other stocks' fluctuations, thereby reducing the overall volatility of the portfolio. So a stock that looks risky by itself may very well make your portfolio safer, depending on its correlation with all the other stocks in your portfolio.
You might also like to view...
Which of the following is true of tort liability of a general partnership?
A. Only the partner who committed the tort is liable. B. Under the UPA, general partners have joint, but not several, liability for torts committed in the course and scope of the partnership. C. A partner can be sued even if he or she did not participate in the commission of the tort. D. If one of the partners in the partnership is released, the other partners are discharged of liability.
Which of the following terms is correctly paired with its description?
A. mura--waste from the underutilization of workers B. muri--waste from producing products not truly required by society B. poka yoke--design of a product or service such that it is sustainable B. heijunka--the uneven levels of production resulting from poor management
On the orders of their corporate employer, Della and Efron, employees of Fabulous Fashionista, a clothing store, switch trademarks on clothing that comes into the store to be sold to consumers. This is most likely
A. forgery. B. larceny. C. robbery. D. no crime.
After-acquired property is property that the debtor acquires after the repayment of a loan under a security agreement
a. True b. False Indicate whether the statement is true or false