The correct answer is: D. the security’s risk is higher.
A security’s risk is a measure of the uncertainty of its future returns. A security with a high risk is more likely to have a low return than a security with a low risk. The dispersion around a security’s return is a measure of how spread out its returns are. A security with a high dispersion has returns that are more spread out, and is therefore more risky.
Option A is incorrect because the expected return is the average of a security’s possible returns. The expected return is not affected by the dispersion of the security’s returns.
Option B is incorrect because the standard deviation is a measure of the dispersion of a security’s returns. The standard deviation is not affected by the expected return.
Option C is incorrect because the stock’s price is determined by the market, and is not affected by the security’s risk.