A stock has an expected rate of return of 13 percent and a standard deviation of 21 percent.Which one of the following best describes the probability that this stock will lose at least half of its value in any one given year?
A)0.1 percent
B)0.5 percent
C)1.0 percent
D)2.5 percent
E)5.0 percent

Question

Quizplus · Accepted Answer

Lower bound of 99 percent range = 0.13 - (3 × 0.21) = -50 percentProbability of losing 50 percent or more in any one year is 0.5 percent.

A Stock Has an Expected Rate of Return of 13