Standard Deviation Security X Security Y Security Z Which of

Standard Deviation

Security X

Security Y

Security Z

Which of the following is correct?

A. Security Z has the greatest total risk because it has the largest standard deviation

B. Security X has the greatest total risk because it has the largest beta

C. Security X has the greatest diversifiable risk because it has the largest beta

D. Security Y has the lowest total risk because it has the lowest beta

E. An equally-weighted portfolio of XYZ will have the same systematic risk as the market portfolio

	Standard Deviation	Beta
Security X	0.35	1.45
Security Y	0.28	1.06
Security Z	0.44	1.22

A) Security Z has the greatest total risk because it has the largest standard deviation

Total risk is measured by standard deviation, and beta measures the amount of systematic risk (undiversafiable). An equally weighted portfolio would have a beta of greater than the market (market beta =1). You cant have an average that is less than 1 if all of the numbers are greater than 1.

Thanks

Standard Deviation Security X Security Y Security Z Which of the following is correct? A. Security Z has the greatest total risk because it has the largest stan

Standard Deviation Security X Security Y Security Z Which of

Solution

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