Final answer:
The statement is false; lower standard deviations indicate lower risk and typically lower returns, while higher risk investments usually have higher standard deviations and the potential for higher returns over time.
Step-by-step explanation:
The assertion that investments with lower standard deviations often have higher risk and are expected to produce higher rates of return is false. Lower standard deviations in investments indicate lower risk, as it represents the consistency of returns.
Higher risk investments, on the other hand, have larger standard deviations and are more volatile. While investments with higher risk have the potential for higher returns, there is no guarantee that they will actually produce higher rates of return.
A lower standard deviation in investment returns indicates less volatility and typically suggests a lower risk. Conversely, higher risk investments, like stocks, often have higher standard deviations due to their volatile nature.
Over time, riskier investments like stocks are expected to produce higher rates of return compared to less risky ones such as bonds and savings accounts, to compensate for the increased risk. The reason an investment like stocks has a high expected return is precisely because it carries a higher risk.