An Investment Consultant Tells Her Client That the Probability of Making

question 96

Multiple Choice

An investment consultant tells her client that the probability of making a positive return with her suggested portfolio is 0.90.What is the risk,measured by standard deviation that this investment manager has assumed in his calculation if it is known that returns from her suggested portfolio are normally distributed with a mean of 6%?

• A) 1.28%
• B) 4.69%
• C) 6.00%
• D) 10.0%

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Definitions:

Bell Curve

The bell curve, or normal distribution, is a graph that shows data that falls in a symmetrical pattern with most results clustering around the mean and fewer observations falling evenly on either side, creating a bell-shaped pattern.

Intelligence Test

a method for assessing an individual’s mental aptitudes and comparing them with those ofothers, using numerical scores.

Standardization

The process of developing uniform procedures for administering and scoring a test to ensure consistency and comparability of results.

Average Intelligence

The level of cognitive ability or IQ that is considered to be in the middle range of the population.