Suppose monthly expected return and standard deviation of the ANU stocks are 2% and 4%, respectively

Finance Oct 27, 2020

Suppose monthly expected return and standard deviation of the ANU stocks are 2% and 4%, respectively. Which of the following is/are true? Select one or more: 1. Annualised expected returns of the ANU stock is 2%. 2. Annualised standard deviation of the ANU stock is 13.9%. 3. An approximate 95% confidence interval of monthly ANU return is (-8%, 8%) 4. The monthly ANU return fluctuates 8% on average. 5. If you invest $100 in the ANU stock, you can earn $4 in a month on average

Expert Solution

The yearly standard deviation = Mothly standard deviation *12^(1/2) = 4%*3.464 = 13.856 = 13.9%

95% confidence = mean - std deviation < mean < mean + std deviation = (-2%, 6%)

Monthly Fluctuation = 6% - (-2%) = 8%

If we invest 100 then our return will be = 2% of 100 = 2

So the option 2 &4 are correct

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