NEED JUST ANSWERS TO DOUBLE CHECK IF I GOT IT CORRECT THANK YOU!!! 1) Trailer Co

Question

NEED JUST ANSWERS TO DOUBLE CHECK IF I GOT IT CORRECT THANK YOU!!!

1)         Trailer Co. stock has an expected return of 12.2 percent and a standard deviation of 11.8 percent. What is the smallest expected loss over the next month given a probability of 5 percent?

A. -4.59%

B. -6.09%

C. -7.27%

D. -11.49%

E. -13.77%

2)        A portfolio has a 3-year standard deviation of 18.1 percent. What is the one-year standard deviation?

A. 6.39%

B. 8.69%

C. 10.45%

D. 11.80%

E. 12.33%

3)        A portfolio has an average return of 14.2 percent and a standard deviation of 14.5 percent. Given this, you should expect to lose at least _____ percent on an annual basis once every century.

Probability of loss

“z” value

1.0%

2.326

2.5%

1.960

5.0%

1.645

A. -19.53

B. -17.24

C. -15.68

D. -1.710

E. -1.550

4)        You purchased one SPX call option with a strike of 1,500. You wrote one SPX call option with the same maturity date and a strike of 1,450. At maturity, what is your payoff if the S&P 500 is at 1,475?

A. -$2,500

B. -$250

C. $25

D. $250

E. $2,500

5)        High Mountain Homes has an expected annual return of 16.1 percent and a standard deviation of 20.3 percent. What is the smallest expected loss over the next month given a probability of 2.5 percent?

A. -6.64%

B. -8.67%

C. -10.14%

D. -12.12%

E. -15.13%

Probability of loss

“z” value

1.0%

2.326

2.5%

1.960

5.0%

1.645

Explanation / Answer

1)smallest expected loss=(12.2%/12)-(1.645*11.8%/sqrt(12))=-4.59%(A)

I assume that the question assumes the expected return of 12.2 percent and a standard deviation of 11.8 percent are per year.otherwise its not mentioned.

2)one-year standard deviation=18.1%/sqrt(3)=10.45%(C)

3)14.2%-2.326*14.5%=-19.53%(A)

4)payoff if the S&P 500 is at 1,475=max(1475-1500,0)-max(1475-1450,0)=0-25=-25 its none of the option.

5) the smallest expected loss over the next month given a probability of 2.5 percent

=(16.1%/12)-1.96*(20.3%/sqrt(12))

=-10.14% (C)

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