Question

2.3. The return on a stock is the change in its market price plus any dividend payments made. Return is usually expressed as a percent of the beginning price. The figure shows a histogram of the distribution of monthly returns for the U.S. stock market over a 273-month period.

What is the minimum value of this distribution?

A)The exact value for the minimum return cannot be identified because we only have a histogram of the returns, not the actual data. However, the lowest return was in the interval –25% to –22.5%

B)The minimum value is –25% monthly percent return on common stocks.

C)The minimum value is –23.75% monthly percent return on common stocks.

D)The minimum value is –22.5% monthly percent return on common stocks.

E)The minimum value is 0% monthly percent return on common stocks

Answer 1

The minimum value of the distribution of monthly returns for the U.S. stock market over 273 months, based on the histogram, is B)The minimum value is –25% monthly percent return on common stocks.

The return on a common stock is determined as the difference between the ending market price and the beginning market price plus dividends received.

The return on stock is expressed as a percentage of the beginning market price.

Thus, according to the x-axis of the histogram, representing the monthly percent return on common stocks, the minimum monthly percent return on common stocks during these 273 months was -25%.