**Understanding Stock Returns and Probability**Digitech's stock analysis provides an insightful look at expected returns with an average of 9.10% and a standard deviation of 13.60%. For investors and students of finance, understanding the probability of achieving various return rates is crucial. In this scenario, we are asked to find the probability of earning less than 22.7%. Calculate the probability using the standard normal distribution:1. **Given Data:** - **Average Expected Return (μ):** 9.10% - **Standard Deviation (σ):** 13.60% - **Return to Find Probability For:** Less than 22.7%2. **Answer Options:** - **A.** 95% - **B.** 84% - **C.** 68%Apply the Z-score formula to determine the probability. The Z-score represents how many standard deviations an element is from the mean:\[ Z = \frac{X - \mu}{\sigma} \]Where:- $ X $ is the value in question (22.7%),- $ \mu $ is the average expected return (9.10%),- $ \sigma $ is the standard deviation (13.60%).After calculating the Z-score, use a standard normal distribution table to find the closest probability. Choose the correct answer from the options provided.Understanding these concepts allows for better informed investment decisions, balancing potential returns against risks.

Given Data Population Mean,μ = 9.1 Population Standard Deviation,σ = 13.6

Answered: Digitech's stock has an average…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Digitech's stock has an average expected return of 9.10% and a standard deviation of 13.60%. The probability of earning less than 22.7% is closest to: O A. 95% O B. 84%. O C. 68%.