If the Annual Rate of Return on a Common Stock

question 135

Multiple Choice

If the annual rate of return on a common stock is normally distributed with a mean of 12% and a standard deviation of 10%, what is the range that has a 95% probability of covering the expected return?

• A) 0.6% to 23.4%
• B) 10.8% to 13.2%
• C) 2% to 22%
• D) -8% to 32%

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Definitions:

Current Year

Refers to the ongoing calendar year at any given point in time.

Laspeyres Price Index

A consumer price index used to measure the change over time in the total cost of purchasing a fixed basket of goods and services.

Per Capita Income

The average income earned per person in a particular area or country, calculated by dividing the area's total income by its total population.

Laspeyres Price Index

A price index that measures the change in the price level of a basket of goods and services, using the quantities of the base period as weights.