An Equity Has an Expected Rate of Return of 8

question 23

Multiple Choice

An equity has an expected rate of return of 8.3% and a standard deviation of 6.4%.Which one of the following best describes the probability that this equity will lose 11% or more in any one given year?

• A)Less than 0.5%.
• B)Less than 1.0%.
• C)Less than 1.5%.
• D)Less than 2.5%.
• E)Less than 5%.

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Definitions:

Journal Entry

A record in accounting that logs the debit and credit parts of a transaction in the financial records of a company.

Journal

A record where all financial transactions are initially recorded, using debits and credits, before being posted to individual accounts.

Increase Side

Refers to the side (debit or credit) of an account that is used to increase its balance, varying by account type.

Normal Balance

The side (debit or credit) on which increases are recorded in an accounting ledger; varies depending on the account type (asset, liability, equity, revenue, or expense).