Question

Woodpecker, Inc., stock has an annual return mean and standard deviation of 12.2 percent and 42 percent. What is the smallest expected loss in the coming month with a probability of 5.0 percent? Round Z-score to 3 decimal places when calculating and answer as a percent rounded to two decimal places.

Can't figure this out for the life of me. Thanks.

Answer 1

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STATS - Microsoft Excel (Product Activation Failed) Add-Ins File Home Insert Page Layout Formulas Data Review View - 2x % Cut Σ AutoSum : A Dr General -11AA = = = D A Wrap Text Merge & Center U - 8.9 Fill 2 Clear $ - % Number Calibri E Copy Paste Format Painter B I Clipboard DZ78 1 DPDQ Formatting as Table Styles Styles Sort & Filter Editing Find & Select Font Alignment Cells DR DS DIDUDV DW DX DY DZ EA EB EC 5 63 64 STANDARD DEVIATION = 42 MEAN RETURN = 12.2 FORMULA =Z= (X - MEAN)/STANDARD DEVIATION 65 SMALLEST EXPECTED LOSS OVER NEXT YEAR WITH A PROBABILITY OF 5% 67 68 P(X<X1) = 0.05 PIZ<((X1-12.2)/42) = 0.05 70 71 72 73 WE CAN ALSO USE EXCEL EXCEL FUNCTION (=NORM.S.INV(0.05)] = FROM Z TABLE, AT 5%, THE Z SCORE = -1.645 -1.645 74 75 76 THEREFORE, ((X1-12.2)/42) =- 1.645 (X1-12.2) = - 1.645 X 42 (X1-12.2) =-69.09 X1 = -56.89 ANSWER: SMALLEST EXPECTED LOSS = -56.89 77 78 79 80 81 KOM Rea EMV_MEAN STDV assignment DEAR Sheet2 COV TIME SERIES corr REGRESSION range CAMERA TREND freg_MATRIX PV FV DIVIDEND ferences INTERVAL, NORMAL HYPOTHI DOI 130% - 9 * 40 ENG 0-_ + 2. B 06-12-2019