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:

Comparative Advantage

Comparative advantage refers to the ability of a country to produce a certain good more efficiently and at a lower opportunity cost than another country.

Absolute Advantage

The capacity of a nation, person, or company to generate a greater quantity of a product or service than its rivals with an identical level of resources.

Trade

The exchange of goods, services, or both between parties, often involving the transfer of money.

Commodity

A basic good used in commerce that is interchangeable with other goods of the same type; commodities are often used as inputs in the production of other goods or services.