Suppose you own a risky asset with an expected return of 12% and a standard deviation of 20%. If the returns are normally distributed,the approximate probability of receiving a return greater than 32% is approximately:
A) 2%.
B) 5%.
C) 16%.
D) 33%.
E) 67%.

Question

Quizplus · Accepted Answer

The z-score for a return of 32% is (32% - 12%) / 20% = 1. The probability of a z-score greater than 1 is approximately 16%.

Suppose You Own a Risky Asset with an Expected Return