Lester has a portfolio with an average return of 135 percent

Lester has a portfolio with an average return of 13.5 percent and a standard deviation of 14.5 percent. He has a one percent probability of losing ______ percent or more in any given year.

Probability of loss \"z\" value

1.0 2.326

2.5 1.960

5.0 1.645

A.) -33.97

B.) -38.87

C.) -20.23

D.) -5.04

E.) -8.37

Solution

Loss Percent = mean - [z-value x standard deviation]

= 0.135 - [2.326 x 0.145] = 0.135 - 0.33727 = -0.20227 or -20.23%

Hence, option \"C\" is correct.