A stock had returns of 22 percent,1 percent,−27 percent,19 percent,and 7 percent annually for the past 5 years.Based on these returns,what is the approximate probability that this stock will earn at least 60 percent in any one given year?
A)almost 0%
B)slightly more than 2.28%
C)slightly more than 0.13%
D)slightly less than 2.28%
E)slightly less than 0.13%

Question

Quizplus · Accepted Answer

Mean = (0.22 + 0.01 − 0.27 + 0.19 + 0.07)/ 5 = 0.044,or 4.4% Σ = {[(0.22 − 0.044)² + (0.01 − 0.044)² + (−0.27 − 0.044)² + (0.19 − 0.044)² + (0.07 − 0.044)²] / (5 - 1)}^.5 = 0.1954,or 19.54% Upper end of the 99.74% probability range = 4.4% + 3(19.54%)= 63.02% Probability of earning at least 63.02% = (100% − 99.74%)/ 2 = .13% The probability of earning 60 percent or more will be greater than the probability of earning 63.02 percent or more,so an approximation of 0.13 percent is reasonable.

A Stock Had Returns of 22 Percent,1 Percent,−27 Percent,19 Percent,and