Bavarian Sausage’s shares have an average historical return of 16.3% and a standard deviation of 5.3%....

Bavarian Sausage’s shares have an average historical return of 16.3% and a standard deviation of 5.3%. What is the probability that the return on Bavarian Sausage will be less than 11%?

a.	84%
b.	50%
c.	16%
d.	32%

ANS: C

1 – 0.5 – 0.34 = 0.16

why the answer wrote like that?

where are 0.5 and 0.34 from?

please explain clearly thank you.

Expert Solution

To calculate this we need to calculate z value
Probability (x <11%)
z value <=(Expected Return-Average return)/standard Deviation <=(11%-16.3%)/5.3% =-1

Using z table for 1 tailed normal distribution for z less than equal =-1
we get probability =0.1587 or 16% (Option c is correct)
Table is given below

jeff jeffy answered 1 year ago

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