Question

Suppose you own a portfolio of stocks and bonds with an expected rate of return of 8%, and a standard deviation (a measure of risk) of 10%. A normal random variable, such as a portfolio's return, stays within two standard deviations of its average approximately 95% of the time.

Given this information, you expect that typically (about 95% of the time), you could experience gains well above 8%, but you could also experience a loss as large as (make sure to put a negative sign in your answer. Round to the nearest integer, and enter as a whole number, e.g. if your answer is negative 20 percent, you should enter -20).

Answer 1