The Figures Below Show Plots of Monthly Excess Returns for Two

question 57

Multiple Choice

The figures below show plots of monthly excess returns for two stocks plotted against excess returns for a market index.
-Which stock is riskier to a non-diversified investor who puts all his money in only one of these stocks?

• A) Stock A is riskier
• B) Stock B is riskier
• C) Both stocks are equally risky
• D) You cannot tell from the information given.

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Definitions:

Revenue Recognition

An accounting principle that determines the specific conditions under which income becomes realized as revenue.

Completed Contract

This accounting practice records the income and expenses of projects after they are finalized, ensuring financial statements only reflect finished work.

Percentage-of-Completion

An accounting method that recognizes revenues and expenses in relation to the completion percentage of a project.

Revenue Recognition

The accounting principle dictating the specific conditions under which income becomes recognized as revenue on the financial statements.