A Theorem That Allows Us to Use the Normal Probability

question 67

Multiple Choice

A theorem that allows us to use the normal probability distribution to approximate the sampling distribution of sample means and sample proportions whenever the sample size is large is known as the

• A)approximation theorem
• B)normal probability theorem
• C)central limit theorem
• D)central normality theorem

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Definitions:

Market Risk Premium

An additional expected return that investors demand for choosing to invest in the stock market over a risk-free investment, reflecting the extra risk assumed.

Average Stock

The average price of a company's stock over a specific period, which can indicate the stock's general trend.

Diversified Portfolio

An investment portfolio that contains a mix of assets (e.g., stocks, bonds, real estate) to reduce risk through diversification.

Market Portfolio

A portfolio consisting of all stocks.