DW Co stock has an annual return mean and standard deviation

DW Co. stock has an annual return mean and standard deviation of 14.5 percent and 43 percent, respectively. What is the smallest expected loss in the coming year with a probability of 16 percent?

Solution

Mean = 14.5 and std dev = 43%

Loss = 16% means area to the left of z value = 0.16

x> X gives loss of 16% means

x= 14.5-43 = -28.5%