Question

A portfolio has three stocks with the Expected Returns and Standard Deviations as shown. Stocks Expected...

A portfolio has three stocks with the Expected Returns and Standard Deviations as shown.

Stocks

Expected Returns Standard Deviations
A 2.17 5.32
B 6.51 15.96
C 4.34 10.64

Which stock has the highest level of risk?

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Answer #1

Stock B has the highest level of risk, as its standard deviation is the highest 15.96% Standard deviation measures deviation from the mean return on either sides. So the larger the standard deviation, the greater is the volatility in the stock, which implies the riskiness of the stock.

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