Suppose Returns on a Stock Are Lognormally Distributed with Expected

question 12

Multiple Choice

Suppose returns on a stock are lognormally distributed with expected (annualized) mean of of 0.10 and standard deviation of 0.20. What is the standard deviation of the continuously compounded return on the stock for one month?

• A) 1.77%
• B) 3.33%
• C) 5.77%
• D) 7.33%

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Definitions:

Price Discrimination

The practice of selling the same product or service at different prices to different customers, not based on cost differences.

Interstate Commerce

The exchange of goods, services, or money between parties in different states, governed by federal law in the United States.

Create A Monopoly

The practice or situation where a single company or entity exclusively controls a particular market, limiting competition and possibly leading to higher prices and less innovation.

Sherman Act

A foundational United States antitrust law aimed at maintaining fair competition in the marketplace by prohibiting monopolies, cartels, and anticompetitive practices.