Which of the following describes standard deviation (SD) and its application to finance most appropriately? Group of answer choices

1) It represents the average distance of a data set from the mean. It is used to indicate the level of risk involved in financial investments. Larger SD represents higher risk in the investment. 2) It represents the average distance of a data set from the mean. It is used to indicate the level of risk involved in financial investments. Larger SD represents lower risk in the investment. 3) It represents the average squared distance of a data set from the mean. It is used to indicate the level of risk involved in financial investments. Smaller SD represents higher risk in the investment. 4) It represents the average squared distance of a data set from the mean. It is used to indicate the level of risk involved in financial investments. Smaller SD represents lower risk in the investment. 5) None of the above