Question

a. A stock has an annual return of 16 percent and a standard deviation of 64 percent. What is the smallest expected loss over the next year with a probability of 5 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places.)

Smallest expected loss:

Answer 1

Z Value for probability of 5% =1.645

Smallest expected loss =Annual Return -Z * Standard Deviation =16%-1.645*64% =-89.28%