Financial Risk Manager Part 1
Get started today
Ultimate access to all questions.
Deep dive into the quiz with AI chat providers.
We prepare a focused prompt with your quiz and certificate details so each AI can offer a more tailored, in-depth explanation.
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%?
Other
Community
NNikitesh
A
0.1052
B
0.2241
C
0.1228
D
0.1587
Explanation:
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:
- Calculate the z-score: z = (16% - 9%) / 7% = 1
- From the standard normal distribution table, P(Z ≤ 1) = 0.8413
- P(return > 16%) = 1 - P(Z ≤ 1) = 1 - 0.8413 = 0.1587
- This corresponds to option D: 0.1587
Comments
Loading comments...