Answer-first summary for fast verification
Answer: 0.1587
A 16% return is 1 standard deviation above the mean of 9%, since the standard deviation is 7% (9% + 7% = 16%). The probability of getting a result more than 1 standard deviation above the mean is 1 - Prob(Z≤1) = 1 - 0.8413 = 0.1587 or 15.87%. **Explanation:** 1. Calculate the z-score: z = (16% - 9%) / 7% = 1 2. From the standard normal distribution table, P(Z ≤ 1) = 0.8413 3. P(return > 16%) = 1 - P(Z ≤ 1) = 1 - 0.8413 = 0.1587 4. This corresponds to option D: 0.1587
Author: Nikitesh Somanthe
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A portfolio has an expected return of 9% with a standard deviation of 7%. If the returns are normally distributed, then what is the probability that the return will be greater than 16%?
A
0.1052
B
0.2241
C
0.1228
D
0.1587
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