A stock has a standard deviation of daily returns of 3 percent. It wants to determine the lower boundary of its probability distribution of returns, based on 1.65 standard deviations from the expected outcome. The stock's expected daily return is .1 percent. The lower boundary is

Question

Quizplus · Accepted Answer

To calculate the lower boundary, we need to subtract 1.65 standard deviations from the expected daily return.

Lower boundary = expected return – (1.65 x standard deviation)
Lower boundary = 0.1 – (1.65 x 0.03)
Lower boundary = 0.1 – 0.0495
Lower boundary = 0.0505 or 4.85%

Therefore, the correct answer is C, F1F1F1S1F1F1F104.85 percent.

A Stock Has a Standard Deviation of Daily Returns of 3