Certified Financial Planner (CFP) Practice Exam · Question
Scenario 13: Which risk assessment tool measures the deviation of an investment's returns from its average return?
Standard deviation is a statistical measure that quantifies the amount of variation or dispersion of a set of data values. In finance, it's used to measure an i
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Question: Scenario 13: Which risk assessment tool measures the deviation of an investment's returns from its average return?
Answer options:
- Beta ✅ Standard deviation
- Duration
- Correlation
Correct answer: Standard deviation
Explanation: Standard deviation is a statistical measure that quantifies the amount of variation or dispersion of a set of data values. In finance, it's used to measure an investment's volatility or risk. The correct answer is "Standard deviation". This capacity-fill scenario 13 reinforces the same competency for the cfp bank and follows the certified explanation standard.
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