A Stock Has an Expected Rate of Return of 7

question 66

Multiple Choice

A stock has an expected rate of return of 7.3% and a standard deviation of 5.4%.Which one of the following best describes the probability that this stock will lose 9% or more in any one given year?

• A)Less than 0.5%
• B)Less than 1.0%
• C)Less than 1.5%
• D)Less than 2.5%
• E)Less than 5%

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Definitions:

Laspeyres Index

A price index used to measure the change in the cost of purchasing a fixed basket of goods and services of the same type and quantity over time.

Prices

The amounts of money required to purchase goods or services, setting the economic value of said goods or services in the market.

Consumption Bundle

A combination of goods and services that a consumer chooses to consume.

Subsidy

Financial support given by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive.