20. The annual stock price returns of Tomorrow Corporation are normally distributed with the expected return...
20.
The annual stock price returns of Tomorrow Corporation are normally distributed with the expected return of 12.5% and the standard deviation of 5.0%. Which one of the following is the statistically likely range of the return on the firm’s stock 95.4% of the time?
between -2.5% and 17.5%
between 5.0% and 25.5%
between 2.5% and 22.5%
between 7.5% and 27.5%
between 10.5% and 27.5%
Homework Answers
| 95.45% of the time the values will lie between 2 standard deviations | ||||||
| within the mean. | ||||||
| Expected return = .125 | ||||||
| Standard deviation = .05 | ||||||
| 2 standard deviations within the mean | ||||||
| (.125 - (2*.05)) and (.125 + (2*.05)) | ||||||
| .025 and .225 | ||||||
| between 2.5% and 22.5% | ||||||
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