Question

Risk exposure A has Mean=$4m and Standard Deviation =$2m. Risk exposure B has Mean=$2m and Standard Deviation=$1m. True or False: exposure A is riskier than exposure B.

a) True
b) False

Answer 1

False. Risk exposure A is not riskier than exposure B. The riskiness of an investment can be determined by looking at its standard deviation. In this case, exposure B has a smaller standard deviation ($1m) compared to exposure A ($2m), indicating that exposure B is less risky than exposure A.

Step-by-step explanation:

False. Risk exposure A is not riskier than exposure B. The riskiness of an investment can be determined by looking at its standard deviation. The higher the standard deviation, the riskier the investment. In this case, exposure B has a smaller standard deviation ($1m) compared to exposure A ($2m), indicating that exposure B is less risky than exposure A.