Suppose Returns on a Stock Are Lognormally Distributed with Expected

question 12

Multiple Choice

Suppose returns on a stock are lognormally distributed with expected (annualized) mean of of 0.10 and standard deviation of 0.20.What is the standard deviation of simple return on the stock for one month?

• A)0.10
• B)0.34
• C)0.58
• D)0.67

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Definitions:

Income

The amount of money or goods that an individual or entity receives in exchange for providing a good or service, or through investing capital.

Utility Functions

Representations that quantify the satisfaction or happiness consumers gain from consuming various bundles of goods and services.

Fair Allocations

In economics and game theory, it refers to the distribution of resources or goods among participants in such a way that the allocation is considered equitable according to certain criteria.

Apples

A type of fruit that is grown on apple trees and comes in several varieties differing in sweetness, color, and size.