DW Co. stock has an annual return mean and standard deviation of 10.5 percent an

Question

DW Co. stock has an annual return mean and standard deviation of 10.5 percent and 45 percent, respectively. What is the smallest expected loss in the coming year with a probability of 2.5 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 10.5 percent and 45 percent, respectively. What is the smallest expected loss in the coming year with a probability of 2.5 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

to find the smallest expected loss in the coming year with a probability of 2.5

We shall use  NORMINV command in excel to find out the

The Excel NORMINV function calculates the inverse of the Cumulative Normal Distribution Function for a supplied value of x, and a supplied distribution mean & standard deviation.

The syntax of the function is:

NORMINV( probability, mean, standard_dev )

=NORMINV(0.025,0.105,0.45) =-77.70%

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