Explain how the statistical concepts of mean and standard deviation apply to the financial ideas of risk and return

What will be an ideal response?

Answer: One common definition of risk is that it is the probability of getting a return different from what you expect. Calculating an average rate of return gives you a reasonable expectation. Then calculating the standard deviation lets you apply the normal curve probabilities around that expectation. So, for example, if you calculate a 10% expected rate of return and a 5% standard deviation, then you can estimate a 34% probability of making a return of between 10% and 15%, or a 16% probability of making more than 15%, or an 84% chance of making less than 15%.