You Have Been Given This Probability Distribution for the Holding-Period

question 57

Multiple Choice

You have been given this probability distribution for the holding-period return for GM stock: $\begin{array}{lcc} \text { Stock of the Economy } & \text { Probability} & \text {HPR } \\ \text { Boom } &0.40&30\%\\ \text { Normal growth } &0.40&11\%\\\text { Recession }&0.20&-10\%\end{array}$

What is the expected variance for GM stock?

• A) 200.00%
• B) 221.04%
• C) 246.37%
• D) 14.87%
• E) 16.13%

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Definitions:

Probability Level

A statistical threshold, often denoted by alpha, which determines the cutoff point at which a result is considered statistically significant.

Statistically Significant

Refers to a result that is unlikely to have occurred by chance alone, according to a predetermined threshold in statistical testing.

F-test

is a statistical test used to compare the variances of two populations, based on sample variances, to assess the equality of the populations' means.

Hypothesis

A proposed explanation or prediction about a phenomenon that can be tested through research and experimentation.