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Multiple Choice Quiz
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1
A certain outcome has a probability equal to 1.
A)True
B)False
2
Comparing two investments with the same expected value, the investment with the largest variance in payoffs is less risky.
A)True
B)False
3
Suppose that a set of investments is ranked from highest to lowest according to the variance in payoffs. If the same set of investments is ranked from highest to lowest by the standard deviation, the same ranking would result.
A)True
B)False
4
Risk-averse individuals always prefer a risky investment to a certain investment with the same expected payoff.
A)True
B)False
5
It is generally easier to reduce idiosyncratic risk than systematic risk by risk spreading.
A)True
B)False





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