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Basic Question 11 of 23

The ______ the standard deviation, the ______ the risk and correspondingly the lower the required return.

A. lower; lower
B. lower; higher
C. higher; lower
D. higher; higher
E. Both A & D are correct.
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User Contributed Comments 4

User Comment
PedroEdmundo That' what the CAPM, the SML and the CML about... risk-return relationship: higher return higher risk, lower risk lower return, at least expected
soarer1 Why not D too?
chamad because the higher the risk, the higher the required return. So D is incorrect.
jonan203 read the question carefully, "corresponding the lower" is not true for D
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Colin Sampaleanu

Colin Sampaleanu

Learning Outcome Statements

calculate and interpret the mean, variance, and covariance (or correlation) of asset returns based on historical data

calculate and interpret portfolio standard deviation

describe the effect on a portfolio's risk of investing in assets that are less than perfectly correlated

CFA® 2024 Level I Curriculum, Volume 2, Module 1.