Asked by jessica Musgrave on Jul 21, 2024
Verified
A stock had returns of 7%, 31%, 16%, and - 22% for the past four years. Which one of the following best describes the probability that this stock will NOT lose more than 59% in any one given year?
A) 84.0%
B) 95.0%
C) 97.5%
D) 99.0%
E) 99.5%
Probability
Probability is a branch of mathematics that measures the likelihood of a given event's occurrence, expressed as a number between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.
Returns
The profit or loss derived from investing or saving, often expressed as a percentage of the original investment.
- Comprehend the probability principles associated with potential losses and gains in investments.
Verified Answer
JA
Jamil AhmedJul 22, 2024
Final Answer :
E
Explanation :
Given the historical returns, the stock has not lost more than 59% in any of the four years provided. Therefore, based on this limited historical data, the probability that it will not lose more than 59% in any given year is 100%. However, since we are selecting the closest option provided, 99.5% (E) is the best choice.
Learning Objectives
- Comprehend the probability principles associated with potential losses and gains in investments.