If E Is the Base of Natural Logarithms, and (σ)

question 57

Multiple Choice

If e is the base of natural logarithms, and (σ) is the standard deviation of the continuously compounded annual returns on the asset, and h is the interval as a fraction of a year, then the quantity (1 + upside change) is equal to:

• A) e^[(σ) * SQRT(h)]
• B) e^[h * SQRT(σ)]
• C) (σ) * e^[SQRT(h)]
• D) none of the above.

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