Over the Past Five Years, a Stock Produced Returns of 11

question 83

Multiple Choice

Over the past five years, a stock produced returns of 11 percent, 14 percent, 4 percent, −9 percent, and 5 percent. What is the probability that an investor in this stock will not lose more than 10 percent in any one given year?

• A) Greater than .5 but less than 1.0 percent
• B) Greater than 1 percent but less than 2.5 percent
• C) Greater than 2.5 percent but less than 16 percent
• D) Greater than 84 percent but less than 97.5 percent
• E) Greater than 95 percent

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Definitions:

Reserve Requirement

The minimum percentage of customer deposits and notes that a bank must hold as reserves rather than lending out, as mandated by the central bank.

Demand Deposits

Bank accounts from which deposited funds can be withdrawn at any time without any notice to the institution, typically through writing checks.

Excess Reserves

The reserves held by banks in excess of what is required by regulations, which can be loaned out to generate additional income.

Required Reserves

The portion of depositors' balances that banks must have on hand as cash or as deposits with the central bank, mandated by the regulatory body.