A Stock Has a Price of $50 and Pays No

question 7

Multiple Choice

A stock has a price of $50 and pays no dividend.The historical standard deviation of the stock is 25% and the expected return on the stock is 12%.At the 95% confidence level,what is the Tail VaR over the next 6 months?

• A) $2.50
• B) $13.63
• C) $22.36
• D) $47.50

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Definitions:

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity of that good consumers are willing and able to purchase.

Subsidy

A financial contribution granted by the government or a public body to support a business or economic sector.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service versus what they actually receive.

Tax

A compulsory financial charge imposed by a government on individuals, corporations, or other entities to fund government spending and public services.