Question

Suppose the returns on an asset are normally distributed. Suppose the historical average annual return for the asset was 5.6 percent and the standard deviation was 10.3 percent. What is the probability that your return on this asset will be less than –2.5 percent in a given year? Use the NORMDIST function in Excel® to answer this question.

What range of returns would you expect to see 95 percent of the time?

What range would you expect to see 99 percent of the time?

Answer #1

Suppose the returns on an asset are normally distributed. The
average annual return for the asset over some period was 6.6
percent and the standard deviation of this asset for that period
was 9.0 percent.
Based on this information, what is the approximate probability
that your return on this asset will be less than -3.1 percent in a
given year?
What range of returns would you expect to see 95 percent of the
time?
What...

Suppose the returns on an asset are normally distributed. The
historical average annual return for the asset was 5.9 percent and
the standard deviation was 10.5 percent. a. What range of returns
would you expect to see 95 percent of the time? (A negative answer
should be indicated by a minus sign. Enter your answers for the
range from lowest to highest. Do not round intermediate
calculations and enter your answers as a percent rounded to 2
decimal places, e.g.,...

Suppose the returns on long-term corporate bonds are normally
distributed. The average annual return for long-term corporate
bonds from 1926 to 2007 was 5.2 percent and the standard deviation
of those bonds for that period was 9.4 percent.
(a)
Based on this historical record, what is the approximate
probability that your return on these bonds will be less than -2.9
percent in a given year? (Do not round intermediate
calculations.)
18.47%
20.22%
19.44%
38.88%
20.41%
(b)
What range of...

Assume that the returns from an asset are normally distributed.
The average annual return for this asset over a specific period was
16.8 percent and the standard deviation of the asset was 42.30
percent. Use the NORMDIST function in Excel® to answer this
question.
What is the approximate probability that your money will double
in value in a single year? (Do not round intermediate calculations
and enter your answer as a percent rounded to 3 decimal places,
e.g., 32.161.)
What...

Suppose the returns on Asset Y are normally distributed. The
average annual return for this asset over 50 years was 13.4 percent
and the standard deviation of the returns was 23.5 percent. Based
on the historical record, use the cumulative normal probability
table (rounded to the nearest table value) in the appendix of the
text to determine the probability that in any given year you will
lose money by investing in common stock.
What is the probablility of a return...

Assume the returns from holding an asset are normally
distributed. Also assume the average annual return for holding the
asset a period of time was 15.9 percent and the standard deviation
of this asset for the period was 33.8 percent. Use the NORMDIST
function in Excel® to answer the following questions.
a.
What is the approximate probability that your money will double
in value in a single year? (Do not round intermediate
calculations and enter your answer as a percent...

Suppose the average return on Asset A is 6.5 percent and the
standard deviation is 8.5 percent, and the average return and
standard deviation on Asset B are 3.7 percent and 3 percent,
respectively. Further assume that the returns are normally
distributed. Use the NORMDIST function in Excel® to answer the
following questions.
a.
What is the probability that in any given year, the return on
Asset A will be greater than 10 percent? Less than 0 percent?
(Do not...

Suppose the average return on Asset A is 6.8 percent and the
standard deviation is 8 percent, and the average return and
standard deviation on Asset B are 3.9 percent and 3.3 percent,
respectively. Further assume that the returns are normally
distributed. Use the NORMDIST function in Excel® to answer the
following questions.
a. What is the probability that in any given year, the return on
Asset A will be greater than 10 percent? Less than 0 percent? (Do
not...

Assume that the returns from an asset are normally distributed.
The average annual return for this asset over a specific period was
14.7 percent and the standard deviation of those returns in this
period was 43.59 percent.
a.
What is the approximate probability that your money will double
in value in a single year? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.)
b.
What about triple in value? (Do...

1. Below are the historical arithmetic average returns and
standard deviations for different asset classes.
Asset class
Mean return
Standard deviation
T-bills
0.035
0.031
Corporate bonds
0.063
0.084
Small company stocks
0.169
0.323
Large company stocks
0.121
0.202
Assume that the returns are normally distributed. Use Excel's
NORM.DIST() function to answer the following questions.
a. What is the probability that the return on corporate bonds
will be less than 4%?
b. What is the probability that the return on small...

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