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:

Security Fall

A decrease in the price or value of a security, such as a stock or bond, often influenced by market conditions and investor behavior.

Long Call

A long call is an options trading strategy where the investor purchases a call option with the expectation that the underlying stock will increase in value before the option expires.

Strike Price

The fixed price at which the owner of an option can buy (in case of a call option) or sell (in case of a put option) the underlying asset.

Break-Even Point

The financial position at which cost and revenue are equal, resulting in neither profit nor loss.