A stock had returns of 8 percent,13 percent,and −3 percent for the past 3 years.Based on these returns,what is the approximate probability that this stock will earn at least 14.19 percent in any one given year?
A)8.00%
B)2.28%
C)15.87%
D)4.56%
E)31.74%

Question

Quizplus · Accepted Answer

Average return = (0.08 + 0.13 − 0.03)/ 3 = 0.06 σ = {[(0.08 − 0.06)² + (0.13 − 0.06)² + (−0.03 − 0.06)²] / (3 − 1)}^.5 = 0.0819 Upper end of the 68.26% probability range = 0.06 + 0.0819= 0.1419,or 14.19% Approximate probability of earning at least 14.19% = (100% − 68.26%)/ 2 = 15.87%

A Stock Had Returns of 8 Percent,13 Percent,and −3 Percent