The Following Frequency Distribution Shows the Monthly Stock Returns for Home

question 29

Multiple Choice

The following frequency distribution shows the monthly stock returns for Home Depot for the years 2003 through 2007. Over time period, the following summary statistics are provided: Mean = 0.31%, Standard deviation = 6.49%, Skewness = 0.15, and Kurtosis = 0.38. At the 5% confidence level, which of the following is the correct conclusion for the Jarque-Bera test for normality?

• A) Reject the null hypothesis; conclude that monthly stock returns are normally distributed with mean 0.31% and standard deviation 6.49%.
• B) Reject the null hypothesis; conclude that monthly stock returns are not normally distributed with mean 0.31% and standard deviation 6.49%.
• C) Do not reject the null hypothesis; conclude that monthly stock returns are normally distributed with mean 0.31% and standard deviation 6.49%.
• D) Do not reject the null hypothesis; conclude that monthly stock returns are not normally distributed with mean 0.31% and standard deviation 6.49%.

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Definitions:

Convertible Bond

A type of bond that can be converted into a predetermined number of shares of the issuing company's equity at certain times during its life, usually at the discretion of the bondholder.

New Shares

New shares refer to additional stock issued by a company, either through public offerings or other means, to raise capital.

Put Option

A financial contract that gives the owner the right, but not the obligation, to sell a specified amount of an underlying security at a predetermined price within a specified time frame.

Option Price

The price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying security or commodity.