A Stock Has an Expected Rate of Return of 14

question 24

Multiple Choice

A stock has an expected rate of return of 14.2 percent and a standard deviation of 23.4 percent.Which one of the following best describes the probability that this stock will lose more than 1/3 of its value in any one year?

• A)Less than .1%
• B)Approximately 2.25%
• C)Approximately 1%
• D)Less than .26%
• E)Approximately 4.60%

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Definitions:

Knowledge

Information, awareness, or familiarity gained through experience or education.

Residual Information

Data or knowledge that remains after the main information has been processed or conveyed, often providing additional insights.

Heuristics

Mental shortcuts or rules of thumb that simplify decision making, often used to speed up the process of finding a satisfactory solution.

Bounded Rationality Model

A concept suggesting that individuals make decisions based on the limited information they have available and within the constraints of their mental capacity.