A stock had returns of 19 percent,12 percent,-29 percent,35 percent,and 4 percent annually for the past five years.Based on these returns,what is the approximate probability that this stock will earn at least 30 percent in any one given year?
A)8%
B)2%
C)16%
D)5%
E).5%

Question

Quizplus · Accepted Answer

Mean = (.19 + .12 - .29 + .35 + .04)/5 = .082Total squared deviation = (.19 - .082)² + (.12 - .082)² + (-.29 - .082)² + (.35 - .082)² + (.04 - .082)² = .22508Standard deviation = √.22508/(5 - 1)= .2372Upper end of the 68.26% probability range = .082 + .2372 = .3192,or 31.92%Probability of earning at least 31.92% = (100% - 68.26%)/2 = 15.87%The probability of earning 30 percent or more will be greater than the probability of earning 31.92 percent or more,so an approximation of 16 percent is reasonable.

A Stock Had Returns of 19 Percent,12 Percent,-29 Percent,35 Percent,and