Suppose the Returns on a Stock Are Lognormally Distributed With \mu

question 4

Multiple Choice

Suppose the returns on a stock are lognormally distributed with $\mu = 0$ and $\sigma = 0.2$ .The expected three-month simple returns on the stock are

• A)0.
• B)0.25%
• C)0.50%
• D)1.01%

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Definitions:

Units

Basic quantities or measurements, such as pieces or portions, used in economic analyses to quantify variables.

Output Good

A product or service that is the result of a production process.

Profit-maximizing

A strategy or approach by businesses aimed at achieving the highest possible profit from their operations.

Factor 2

In a variety of contexts, this could refer to the second variable or element in an equation, model, or experimental design that influences outcomes.