Suppose You Own a Risky Asset with an Expected Return

question 50

Multiple Choice

Suppose you own a risky asset with an expected return of 12% and a standard deviation of 20%. If the returns are normally distributed,the approximate probability of receiving a return greater than 32% is approximately:

• A) 2%.
• B) 5%.
• C) 16%.
• D) 33%.
• E) 67%.

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Definitions:

Innovate

The process of creating new ideas, products, or methods, often resulting in improved efficiency, effectiveness, or competitive advantage.

Economic Profits

The surplus remaining after subtracting total costs from total revenues, including both explicit and implicit costs.

Creative Destruction

A concept in economics that refers to the process by which new innovations lead to the demise of old technologies and economic structures, driving economic growth through renewal.

Joseph Schumpeter

Joseph Schumpeter was a 20th-century economist known for his theories on business cycles, innovation, and the concept of "creative destruction."