A stock has an average rate of return of 11.5% and a standard deviation of 12.8%. What is the probability that the stock will lose more than 26.9% in any one year?

Question

Quizplus · Accepted Answer

The probability can be calculated using the Z-score formula: Z = (X - μ) / σ, where X is -26.9%, μ is 11.5%, and σ is 12.8%. The Z-score is approximately -3. This corresponds to a probability of about 0.13% in a standard normal distribution, closest to 0.50%.

A Stock Has an Average Rate of Return of 11