Floyd Corp. stock has an annual standard deviation of 37 percent and an expected return of 12 percent. What is the smallest expected loss over the next month with a probability of 2.5 percent? Note: The corresponding "Z" value is 1, 96.
A) -19.93%
B) -21.08%
C) -18.35%
D) -25.43%
E) -23.67%

Question

Quizplus · Accepted Answer

The smallest expected loss can be calculated using the formula: Expected Return - (Z * Standard Deviation). Convert the annual standard deviation to monthly by dividing by the square root of 12. Then, calculate the loss using the given Z value of 1.96.