If the standard deviation of a stock's returns over the last 12 quarters is 4 percent, and if there is no perceived change in volatility, there is a ____ percent probability that the stock's returns will be within ____ percentage points of the expected outcome.
A)68; 4
B)68; 8
C)95; 8
D)95; 6
E)None of these are correct.

Question

Quizplus · Accepted Answer

According to the empirical rule (or 68-95-99.7 rule) in statistics, if the data follows a normal distribution, then approximately 68% of the data points will fall within one standard deviation (σ) of the mean. Given the standard deviation is 4 percent, there is a 68 percent probability that the stock's returns will be within 4 percentage points (one standard deviation) of the expected outcome.

If the Standard Deviation of a Stock's Returns Over the Last