DW Co. stock has an annual return mean and standard deviation of 12 percent and

Question

DW Co. stock has an annual return mean and standard deviation of 12 percent and 35 percent, respectively. What is the smallest expected loss in the coming year with a probability of 5 percent? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

DW Co. stock has an annual return mean and standard deviation of 12 percent and 35 percent, respectively. What is the smallest expected loss in the coming year with a probability of 5 percent? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

Prob[RP,1 E(Rp) × T – 1.645PT ] = 5%

Prob[RP,1 12% × 1 – 1.645(.35)1 ] = 5%

Prob[RP,1 0.12 – 0.57575] = 5%

Prob[RP,1 –45.575%] = 5%

Expected Los (Round off) = 45.58%

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