Question

You have an investment opportunity with the following normally distributed risk & return characteristics: Mean/Expected Return:...

You have an investment opportunity with the following normally distributed risk & return characteristics:

Mean/Expected Return: 11.5%

Standard Deviation: 7.5%

What is the likelihood the investment will return more than 19%?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Probability the investment will return more than 19% = 1 - probability the investment will return less than 19%

Probability the investment will return less than 19% is calculated using NORMDIST function in Excel :

x = 19%

mean = 11.5%

standard_dev = 7.5%

cumulative = TRUE

Probability the investment will return less than 19% is 81.13%

Probability the investment will return more than 19% = 1 - probability the investment will return less than 19%

Probability the investment will return more than 19% = 1 - 81.13%

Probability the investment will return more than 19% = 15.87%

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A manufacturer knows that their items have a normally distributed length, with a mean of 11.5...
A manufacturer knows that their items have a normally distributed length, with a mean of 11.5 inches, and a standard deviation of 0.5 inches. If 19 items are chosen at random, what is the probability that their mean length is less than 11.2 inches?
Suppose that the return of stock A is normally distributed with mean 4% and standard deviation...
Suppose that the return of stock A is normally distributed with mean 4% and standard deviation 5%, the return of stock B is normally distributed with mean 8% and standard deviation 10%, and the covariance between the returns of stock A and stock B is −30(%)2 . Now you have an endowment of 1 dollar, and you decide to invest w dollar in stock A and 1 − w dollar in stock B. Let rp be the overall return of...
1. A manufacturer knows that their items have a normally distributed lifespan, with a mean of...
1. A manufacturer knows that their items have a normally distributed lifespan, with a mean of 7.5 years, and standard deviation of 2 years. The 8% of items with the shortest lifespan will last less than how many years? Give your answer to one decimal place. 2. A particular fruit's weights are normally distributed, with a mean of 796 grams and a standard deviation of 13 grams. The heaviest 7% of fruits weigh more than how many grams? Give your...
You are considering the risk-return of two mutual funds for investment. The relatively risky fund promises...
You are considering the risk-return of two mutual funds for investment. The relatively risky fund promises an expected return of 14.7% with a standard of 15.6%. The relatively less risky fund promises an expected return and standard deviation of 6.4% and 3.8%, respectively. Assume that the returns are approximately normally distributed. Using normal probability calculations and complete sentences, give your assessment of the likelihood of getting, on one hand, a negative return and on the other, a return above 10%...
You manage a risky portfolio P that has the following characteristics: expected return = 16% and...
You manage a risky portfolio P that has the following characteristics: expected return = 16% and the standard deviation of the return of your portfolio = 20%. The risk-free rate is at 4%. Your client wants to invest a proportion of her total investment budget in your risky portfolio to maximize expected return and at the same time limit the volatility to no higher than 14% on her overall portfolio. Then the proportion she should invest in your risky portfolio...
You are considering the risk-return profile of two mutual funds for investment. The relatively risky fund...
You are considering the risk-return profile of two mutual funds for investment. The relatively risky fund promises an expected return of 7% with a standard deviation of of 13%. The relatively less risky fund promises an expected return and standard deviation of 4.5% and 5.2%, respectively. Assume that the returns are approximately normally distributed. a. Which mutual fund will you pick if your objective is to minimize the probability of earning a negative return? b. Which mutual fund will you...
A manufacturer knows that their items have a normally distributed lifespan, with a mean of 7.5...
A manufacturer knows that their items have a normally distributed lifespan, with a mean of 7.5 years, and standard deviation of 1.2 years. If 9 items are picked at random, 6% of the time their mean life will be less than how many years? Give your answer to one decimal place.
1. A manufacturer knows that their items have a normally distributed length, with a mean of...
1. A manufacturer knows that their items have a normally distributed length, with a mean of 17.5 inches, and standard deviation of 5.1 inches. If one item is chosen at random, what is the probability that it is less than 14.3 inches long? 2. A manufacturer knows that their items have a normally distributed lifespan, with a mean of 6 years, and standard deviation of 0.8 years. If you randomly purchase one item, what is the probability it will last...
You are considering an investment opportunity that costs $175,000 and will return 12% on your investment....
You are considering an investment opportunity that costs $175,000 and will return 12% on your investment. There are higher returning investments available in the financial markets that are comparable to this investment opportunity in terms of risk. However, a bank offers to lend you up to $175,000 at 6% with no conditions. Should you undertake this investment opportunity? a. Yes because the return on the investment opportunity is greater than its opportunity cost of capital. b. No because the return...
Investment A yields a gain that is normally distributed with mean 7 and standard deviation 3.2....
Investment A yields a gain that is normally distributed with mean 7 and standard deviation 3.2. Investment B yields a gain that is normally distributed with mean 6 and standard deviation 2.9. Which investment is better in terms of VaR?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT