The Following Information Is to Be Used to Answer Questions

question 8

Multiple Choice

The following information is to be used to answer questions 13-17.
$\begin{array}{llcc}\underline{ \text { SD }} &\underline{ \text {Beta }}&\underline{ \text {alpha }}&\underline{ \text { \(\mathrm{R}^{2}\) }} \\ \text { Fund 11.97 } &1.0&1.3&0.95\\ \text { Fund 22.94 } &0.8&0.6^*&0.80\\ \text { Fund 33.82} &1.2&-3.5&0.90\\ \text { Fund 44.70 } &1.4&4.2&065\\ &\\\end{array}$
$\text { *Significant at the } 5 \text { percent level }$
-Which of these four funds had the largest market risk?

• A) Fund 1 Solution: Fund 4 has the highest beta.
• B) Fund 2
• C) Fund 3
• D) Fund 4

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Definitions:

Revenue Recognition

The accounting principle that dictates the process and timing of recognizing revenue in the financial statements, typically when it is earned and realizable.

GAAP

Generally Accepted Accounting Principles, a collection of commonly-followed accounting rules and standards for financial reporting in a particular jurisdiction, notably the United States.

Cookie Jar Reserves

Accounting practices where companies set aside reserves during good financial periods to smooth out earnings in future, less favorable periods.

Estimated Obligations

The predicted liabilities or commitments a company expects to incur in the future, often found in financial planning and budgetary processes.