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
A)- 1.65 percent.
B)- 3.00 percent
C)- 4.85 percent.
D)- 5.05 percent.

Question

Quizplus · Accepted Answer

The lower boundary is calculated as the expected return minus 1.65 times the standard deviation. So, it's 0.1% - (1.65 * 3%) = -4.85%.

A Stock Has a Standard Deviation of Daily Returns of 3