Answer: 4.76%

## Explanation To annualize daily volatility, we use the square root of time rule: $$\sigma_{\text{annual}} = \sqrt{252 \times \sigma_{\text{daily}}^2}$$ Given: - Daily volatility (σ_daily) = 0.3% = 0.003 - Number of trading days = 252 Calculation: $$\sigma_{\text{annual}} = \sqrt{252 \times (0.003)^2} = \sqrt{252 \times 0.000009} = \sqrt{0.002268} = 0.047623 = 4.7623\%$$ Therefore, the annualized volatility is approximately **4.76%**, which corresponds to option D. ### Key Points: - The square root of time rule assumes returns are independent and identically distributed - For volatility scaling, we use variance (σ²) which is additive over time - The square root of 252 is approximately 15.87, but we multiply variance by 252 first, then take the square root

Author: Tanishq Prabhu