Answer: The realized return is 26.7%, and the annual volatility is 9.6%.

The correct answer is C. The realized return is calculated using the formula \( \text{Realized return} = (1/T) \times \ln(\frac{S_T}{S_0}) \), where \( T \) is the time period in years, \( S_0 \) is the initial stock price, and \( S_T \) is the stock price at the end of the period. Given \( T = 0.5 \) years (6 months), \( S_0 = 280 \), and \( S_T = 320 \), the realized return is \( 2 \times \ln(\frac{320}{280}) = 0.2671 \) or 26.7%. The annual volatility is calculated by scaling up the monthly volatility using the square root of time rule, which is \( \text{Volatility per year} = \sigma \times \sqrt{12} \), where \( \sigma \) is the monthly volatility. With a monthly volatility of 2.76%, the annual volatility is \( 0.0276 \times \sqrt{12} = 0.0956 \) or 9.6%. Option A is incorrect because it calculates the realized return as a simple percentage change rather than using the logarithmic return formula. Option B incorrectly assumes that annual volatility is simply 12 times the monthly volatility without applying the square root of time rule. Option D is incorrect for the same reason as B regarding the annual volatility calculation.

Author: LeetQuiz Editorial Team