NOTE: Please show how you get to the solution. The answer to the question was provided n our lecture notes but I am unsure of how to get to the solution. Please show if you can!

Continuously Compounded Return Example:

Example: a stock with an expected return of 17% per annum and a volatility of 20% per annum.

What is the distribution for the rate of return (continuously compounded; annualized) realized over 3 years?

Answer:

normal distribution with mean = 0.15 and variance = 0.0133