An equity has an expected rate of return of 8.3% and a standard deviation of 6.4%.Which one of the following best describes the probability that this equity will lose 11% 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 11% or more is calculated using the normal distribution. The z-score for a return of -11% is approximately -3.03, which corresponds to a probability of less than 0.5%.

An Equity Has an Expected Rate of Return of 8