Suppose You Own a Risky Asset with an Expected Return

question 25

Multiple Choice

Suppose you own a risky asset with an expected return of 12% and a standard deviation of 20%. If the returns are normally distributed, the approximate probability of receiving a return greater than 32% is:

• A) 0.67.
• B) 0.33.
• C) 0.05.
• D) 0.02.
• E) 0.16.

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Definitions:

Yearly Dividend

The total dividend payment a company offers to its shareholders annually, which can be a sign of the company's profitability and financial health.

Common Stock

A form of corporate equity ownership, a type of security representing holding a portion of a company.

Receiving Dividends

This refers to the action of shareholders being paid a portion of a company's earnings based on the number of shares they own.

Vote

The act of expressing a choice or decision, often within the context of democratic processes or organizational decision-making.