Question 714 return distribution, no explanation
Which of the following quantities is commonly assumed to be normally distributed?
(a) Prices, ##P_1##.
(b) Gross discrete returns per annum, ##r_{\text{gdr 0 }\rightarrow \text{ 1}} = \dfrac{P_1}{P_0} ##.
(c) Effective annual returns per annum also known as net discrete returns, ##r_{\text{eff 0 }\rightarrow \text{ 1}} = \dfrac{P_1 - P_0}{P_0} = \dfrac{P_1}{P_0}-1##.
(d) Continuously compounded returns per annum, ##r_{\text{cc 0 }\rightarrow \text{ 1}} = \ln \left( \dfrac{P_1}{P_0} \right)##.
(e) Annualised percentage rates compounding per month, ##r_{\text{apr comp monthly 0 }\rightarrow \text{ 1 mth}} = \left( \dfrac{P_1 - P_0}{P_0} \right) \times 12##.