A Security Has an Expected Return of 10% and a Standard

question 16

Multiple Choice

A security has an expected return of 10% and a standard deviation of.03. If the security is normally distributed, then about 68% of the time, the security return will be

• A) between 10% and 13%.
• B) between 7% and 10%.
• C) between 7% and 13%.
• D) between 4% and 10%.
• E) between 13% and 16%.

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Definitions:

Incremental Cash Flows

The additional cash flow a project generates over the basic operation cash flows, used to analyze the profitability of a potential investment.

Replacement Project

A replacement project involves investing in new assets to replace old, inefficient, or obsolete ones to maintain or improve operational efficiency.

Operating

Pertaining to the day-to-day operations of a company or organization, involving processes that contribute to the production of goods or services.

Book Value

The net value of a company's assets minus its liabilities and preferred stock, calculated from the balance sheet.