Which of the following is a common method of assessing risk in finance?

Standard deviation is commonly used in finance as a method for assessing risk because it quantifies the amount of variation or dispersion of a set of values. In the context of investments, it helps to measure the volatility of an asset's returns in relation to its average return. A higher standard deviation indicates a higher level of risk, as it suggests that the returns can deviate significantly from the expected or average return. This measure is crucial for investors and financial analysts, as it aids in evaluating the potential risk associated with a particular investment or portfolio compared to expected returns.

The other methods mentioned, while valuable for different purposes, do not specifically focus on measuring risk in the same way that standard deviation does. Return on Investment measures profitability, volume of transactions can give insights into market activity but doesn’t reflect risk, and Net Present Value analysis assesses the value of an investment based on future cash flows without directly addressing their variability. Thus, standard deviation stands out as the most direct and widely accepted measure of risk.