Suppose You Own a Risky Asset with an Expected Return

question 1

Multiple Choice

Suppose you own a risky asset with an expected return of 16.3 percent and a standard deviation of 31.3 percent.If the returns are normally distributed,the approximate probability of losing 15 percent or more in a single year is ____ percent.

• A)2.28
• B)4.56
• C)15.87
• D)31.74
• E).26

---

Definitions:

Good Substitutes

Products or services that can be used in place of one another, where the increase in price of one leads to an increase in demand for the other.

Price Elasticity of Demand

A measure of how much the quantity demanded of a good changes in response to a change in its price.

Total Expenditures

The sum of all spending or costs incurred by an individual, firm, or government.

Price Elasticity of Demand

An indicator of the responsiveness of the quantity demanded of a product to changes in its price.