If the Standard Deviation of the Continuously Compounded Returns on the Asset

question 12

Multiple Choice

If the standard deviation of the continuously compounded returns on the asset is 40 percent and the interval is a year, then the downside change is equal to

• A)−27.4 percent.
• B)−53.6 percent.
• C)−33 percent.
• D)−38.7 percent.

---

Definitions:

Perpetual Inventory System

An inventory system under which the company keeps detailed records of the cost of each inventory purchase and sale, and the records continuously show the inventory that should be on hand.

FIFO Method

An inventory valuation method that assumes the first items placed into inventory are the first sold, thus expenses are based on the oldest costs.

Latest Goods On Hand

Refers to the most recent inventory of products or materials that a company has available for use or sale.

Lower-Of-Cost-Or-Market Basis

An accounting principle where inventory is recorded at either its historical cost or market value, whichever is lower, to ensure conservatism.