TRUE or FALSE! WHY?
1. The wider the probability distribution of expected future returns, the smaller the risk of a given investment as measured by the standard deviation.
2. A tighter probability distribution is consistent with an investment with low risk.
3. When we say that rational investors are risk-averse, it means the investor does not like risk and would consider a higher risk project only if the expected return from that project is sufficient to compensate for the higher risk.
4. When investors require higher rates of return for investments that have higher variability of returns, this is evidence of risk aversion.