A stock has an expected rate of return of 7.3% and a standard deviation of 5.4%.Which one of the following best describes the probability that this stock will lose 9% or more in any one given year?
A)Less than 0.5%
B)Less than 1.0%
C)Less than 1.5%
D)Less than 2.5%
E)Less than 5%

Question

Quizplus · Accepted Answer

The probability of losing 9% or more can be calculated using the normal distribution. The z-score for a -9% return is approximately -3.02, which corresponds to a probability of less than 0.5%.

A Stock Has an Expected Rate of Return of 7