A equity had returns of 11%,1%,9%,15%,and -6% for the past five years.Based on these returns,what is the approximate probability that this equity will earn at least 23% in any one given year?
A)0.5%
B)1.0%
C)2.5%
D)5.0%
E)16.0%

Question

Quizplus · Accepted Answer

To find the probability that the equity will earn at least 23% in any given year, we need to calculate the mean and standard deviation of the returns.
Mean = (11%+1%+9%+15%-6%)/5 = 6%
Standard deviation = sqrt(((11%-6%)^2+(1%-6%)^2+(9%-6%)^2+(15%-6%)^2)/4) = 7.39%
Using the Z-score formula, we can find the probability:
Z = (23%-6%)/7.39% = 2.03
From a standard normal distribution table, we find that the probability of earning 23% or more is approximately 2.5%, which is closest to answer choice C.

A Equity Had Returns of 11%,1%,9%,15%,and -6% for the Past