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1) A stock has an average rate of return of 11
1) A stock has an average rate of return of 11.5% and a standard deviation of 12.8%. What is the probability that the stock will lose more than 26.9% in any one year? A. 0.50% B. 1.00% C. 1.25% D. 2.50% E. 5.00
2
A price taker in the foreign exchange market is: O a hedger who wants to avoid risk O a market participant who buys and sells currencies at the exchange rates quoted by large commercial banks O a market participant who takes the current exchange rate to be the equilibrium exchange rate a speculator who buys a currency at the current exchange rate, hoping that it would appreciate
Expert Solution
1 Solution
z = (xbar-mean)/SD
Lose more than 26.9% means from mean = 0
There will be a deviation of -26.9% from zero
= z =
=> (-26.9-11.5)/12.8
P(Z<-3)
= 0.0005
= 0.5%
OPTION A
2
A price taker is someone who will be buying and selling the currencies which are already fixed by price makers.
Price taker does not have the power to influence the market price and he will be willing to buy and sell at the existing price.
All the other options related to price takers are False.
Correct answer is option (B) A market participant who buys and sell currencies at exchange rates quoted by large commercial banks.
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