1. What is a good use of standard deviation when determining the risk of an investment in common stock?

1. Helps develop bands around an individual stock's expected value.
2. Helps determine a portfolio's level of variability from the mean.
3. Helps establish bands on the covariance between various stocks in the portfolio.
4. Helps establish the amount of diversification that is needed in a portfolio.

2. A $1,000 4-year par value bond with a 5 percent annual coupon has a market price of $1,027.06 has a yield to maturity of 4.25 percent. The bond can be called at the end of each of the first three years with a yield to call of 4.26 percent in the first year, 4.27 percent in the second year, and 4.29 percent in the third year. What year would produce the yield to worst?

1. First year
2. Second year
3. Third year
4. Fourth year