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Mutual fund AAAAX has an expected return of 15% and expected standard deviation of 25%. If...

Mutual fund AAAAX has an expected return of 15% and expected standard deviation of 25%. If the fund’s returns are normally distributed, what is the chance of losing money in any year on AAAAX? (10 points) (Show calculations in Excel.)

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Answer #1

Hello

YOUR REQUIRED ANSWER IS 0.2743

Given that:

Mean = 0.150
Standard Deviation = 0.250

Hence, we have to calculate the probability that in any given year, that the returns are less than 0.

Hence,

We can use the following function in excel to calculate the probability of normal distribution in excel:

=NORM.DIST(0,0.15,0.25,TRUE)

which comes out to be 0.2743

In the function,

0 stands for the value for which we have to calculate the probability

0.15 stands for mean return

0.25 stands for standard deviation

TRUE stands for the cumulation effect.

Thanks!

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