A stock had returns of 7 percent,15 percent,and -1 percent for the past three years.Based on these returns,what is the probability that this stock will earn at least 15 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 = (.07 + .15 - .01)/3 = .07Total squared deviation = (.07 - .07)² + (.15 - .07)² + (-.01 - .07)² = .0128Standard deviation = √.0128/(3 - 1)= .08Upper end of the 68.26% probability range = .07 + .08 = .15,or 15%Probability of earning at least 15% = (100% - 68.26%)/2 = 15.87%

A Stock Had Returns of 7 Percent,15 Percent,and -1 Percent