Your portfolio has an annualized standard deviation of 17.8% and average annual return of 13.6%. You have a 1% probability of losing ________ or more in any given year. Note: the 1% probability level has a "Z" value of 2.326.
A) 27.80%
B) 21.29%
C) 18.47%
D) 13.38%
E) 8.86%

Question

Quizplus · Accepted Answer

To calculate the maximum loss at 1% probability level, we need to use the formula: Z-score * annualized standard deviation - average annual return. Substituting the values, we get: 2.326 * 17.8% - 13.6% = 27.80%. Therefore, the answer is (A) 27.80%.

Your Portfolio Has an Annualized Standard Deviation of 17