Explain in your own words why the risk of a portfolio is often measured by the standard deviation of past returns on that portfolio.

Use the results presented in your graphs and computations to respond succinctly:

1. Explain in your own words why the risk of a portfolio is often measured by the standard deviation of past returns on that portfolio.

2. Based on holding periods during this time period for up to 10 years, are stocks ever less risky than bonds are bills?

3. We can also measure risk by the “worst case scenario”. Based on this measure, which stock “holding period” portfolio is less risky and why?

4. Identify the minimum risk portfolio and explain why no rational investor would hold less than 20 % stocks even for a one-year holding period investment

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