The standard deviation of the returns of Stock A is 45.9 percent, and the standard deviation of the returns of Stock B is 52.7 percent. Which of the following statements about the stocks is correct?
A. Stock A has a wider (more dispersed) probability distribution than Stock B, and hence lower total risk.
B. Stock A has a tighter probability distribution than Stock B, and hence lower total risk.
C. Stock B has a wider (more dispersed) probability distribution than Stock A, and hence lower total risk.
D. Stock B has a tighter probability distribution than Stock A, and hence lower total risk.
E. Stock B has a lower risk than Stock A, but nothing can be said about their probability distributions.
Answer: B
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