A Stock Has an Expected Rate of Return of 8

question 41

Multiple Choice

A stock has an expected rate of return of 8.3 percent and a standard deviation of 6.4 percent.Which one of the following best describes the probability that this stock will lose more than 4.50 percent in any one given year?

• A)Less than 2.5 percent
• B)Less than 1.0 percent
• C)Less than 1.5 percent
• D)Less than .5 percent
• E)Less than 5 percent

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Definitions:

Revaluation Surplus

An increase in the value of an asset that is reflected in the books of accounts, primarily through a revaluation process.

Cash-Basis Expenses

Expenses recorded when cash is actually paid out, under the cash basis of accounting, as opposed to the accrual basis which recognizes expenses when they are incurred.

Warranty Expenses

Costs recognized by companies to cover repairs or replacements for customers as part of product warranty agreements.

Inventory Purchases

The buying of goods to be sold in the normal course of business operations.