A Security with Normally Distributed Returns Has an Annual Expected

question 36

Multiple Choice

A security with normally distributed returns has an annual expected return of 18% and standard deviation of 23%. The probability of getting a return between -28% and 64% in any one year is ________.

• A) 68.26%
• B) 95.44%
• C) 99.74%
• D) 100%

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Definitions:

Financial Planning Process

The financial planning process involves setting financial goals, analyzing current financial conditions, developing strategies to achieve those goals, and implementing and monitoring the strategy.

Planning Horizon

The long-range time period the financial planning process focuses on, usually the next two to five years.

Dividend Policy

A company's strategy or policy to decide how much profit it will pay out to shareholders as dividends.

Retention Ratio

The fraction of net profits not paid out as dividends but kept within the corporation for reinvestment or other purposes.