1. Foundations

Risk Return — Quiz

Test your understanding of risk return with 5 practice questions.

Practice Questions

Question 1

Which of the following measures the average of the squared deviations from the mean, providing a gauge of the volatility of returns?

Question 2

What is the primary reason that diversification reduces portfolio risk?

Question 3

If an investment has an expected return of $10\%$ and a standard deviation of $20\%$, what does the standard deviation represent?

Question 4

A portfolio manager is constructing a portfolio with two assets, A and B. Asset A has an expected return of $8\%$ and Asset B has an expected return of $14\%$. If the portfolio is weighted $70\%$ in Asset A and $30\%$ in Asset B, what is the expected return of the portfolio?

Question 5

Which of the following types of risk can be effectively reduced or eliminated through proper diversification?