To measure an investment's risk, you may
use all of the following except:
A. time value
B. range of returns
C. standard deviation of returns
D. subjective measures of risk
To determine an investment's risk, there are several methods you can use. However, one of the options listed does not accurately measure an investment's risk. Let's go through each option and explain how they can be used to assess risk:
A. Time value: Time value is not directly related to measuring risk. It refers to the concept that money available in the present is worth more than the same amount of money in the future. Time value is typically used when calculating the present value and future value of cash flows.
B. Range of returns: The range of returns measures the disparity between the lowest and highest potential returns of an investment. A wider range indicates higher risk because there is a greater possibility of experiencing extreme negative or positive returns.
C. Standard deviation of returns: The standard deviation of returns is a statistical measure that calculates the volatility or variability of an investment's returns. It quantifies how much an investment's returns deviate from its average return. A higher standard deviation indicates higher risk.
D. Subjective measures of risk: Subjective measures of risk involve personal opinions or judgments about the risk associated with an investment. These measures, such as qualitative assessments or expert opinions, can be valuable but they are not as precise as quantitative methods like the ones mentioned above.
Considering the explanations above, the correct answer would be D. subjective measures of risk, as they are not a quantitative or objective way to measure an investment's risk.