29. In economic theory, a “hurdle rate" is the minimum return that a person requires before he or she will make an investment. A research report says that annual re- turns from a specific class of common equities are distributed according to a normal distribution with a mean of 12% and a standard deviation of 18%. A stock screener would like to identify a hurdle rate such that only 1 in 20 equities is above that value. Where should the hurdle rate be set?
29. In economic theory, a “hurdle rate" is the minimum return that a person requires before he or she will make an investment. A research report says that annual re- turns from a specific class of common equities are distributed according to a normal distribution with a mean of 12% and a standard deviation of 18%. A stock screener would like to identify a hurdle rate such that only 1 in 20 equities is above that value. Where should the hurdle rate be set?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:29. In economic theory, a “hurdle rate" is the minimum return that a person requires
before he or she will make an investment. A research report says that annual re-
turns from a specific class of common equities are distributed according to a normal
distribution with a mean of 12% and a standard deviation of 18%. A stock screener
would like to identify a hurdle rate such that only 1 in 20 equities is above that
value. Where should the hurdle rate be set?
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