The continuously compounded annual return on a stock is normally distributed with a mean of 23% and standard deviation of 29%. With 95.45% confidence, we should expect its actual return in any particular year to be between which pair of values? Hint. Refer to Figure 5.3. O-35.0% and 81.0% O-25.0% and 81.0% O-23.7% and 69.7% O-12.0% and 59.5%
The continuously compounded annual return on a stock is normally distributed with a mean of 23% and standard deviation of 29%. With 95.45% confidence, we should expect its actual return in any particular year to be between which pair of values? Hint. Refer to Figure 5.3. O-35.0% and 81.0% O-25.0% and 81.0% O-23.7% and 69.7% O-12.0% and 59.5%
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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Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Question
Transcribed Image Text:The continuously compounded annual return on a stock is normally distributed with a mean of 23% and standard deviation of 29%.
With 95.45% confidence, we should expect its actual return in any particular year to be between which pair of values? Hint. Refer to
Figure 5.3.
O-35.0% and 81.0%
O-25.0% and 81.0%
O-23.7% and 69.7%
O-12.0% and 59.5%
Transcribed Image Text:<-3σ
<-20
-50% -30%
-10
- 10%
68.26%
95.44%
99.74%
O
10%
+10
30%
+20
50%
+30
70%
Figure 5.3 The normal distribution with mean 10% and standard deviation 20%.
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