Question

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 returns would you expect to see 95 percent of the
time? (Do not round intermediate
calculations.) |

-13.60% to 24.00%

-23.00% to 33.40%

-1.00% to 19.80%

-12.92% to 22.80%

-14.28% to 25.20%

(c) |
What range would you expect to see 99 percent of the time?
(Do not round intermediate calculations.) |

-24.15% to 35.07%

-6.20% to 25.00%

-21.85% to 31.73%

-23.00% to 33.40%

-13.60% to 24.00%

Answer #1

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 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.
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...

Large company stocks 12%
Small company stocks 16.6%
Long term corporate bonds 6.3%
Long term government bonds 6.0%
US treasury bills 3.4%
Inflation 3.0%
a.
What was the average annual return on large-company stock from
1926 through 2016 in nominal terms? (Do not round
intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
b.
What was the average annual return on large-company stock from
1926 through 2016 in real terms? (Do not round...

Problem 10-28 Using Probability Distributions [LO 3] Suppose the
returns on long-term corporate bonds and T-bills are normally
distributed. Assume for a certain time period, long-term corporate
bonds had an average return of 5.8% and a standard deviation of
8.9%. For the same period, T-bills had an average return of 4.3%
and a standard deviation of 3.1%. Use the NORMDIST function in
Excel® to answer the following questions: a. What is the
probability that in any given year, the return...

Consider the following table for the total annual returns for a
given period of time. Series Average return Standard Deviation
Large-company stocks 11.7 % 20.6 % Small-company stocks 16.4 33.0
Long-term corporate bonds 5.1 8.4 Long-term government bonds 6.1
9.4 Intermediate-term government bonds 5.6 5.7 U.S. Treasury bills
3.8 3.1 Inflation 3.1 4.2 What range of returns would you expect to
see 95 percent of the time for long-term corporate bonds? (A
negative answer should be indicated by a minus...

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...

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...

Consider the following
table for the total annual returns for a given period of
time.
Series
Average return
Standard Deviation
Large-company
stocks
10.8
%
21.1
%
Small-company
stocks
16.4
33.0
Long-term corporate
bonds
6.2
8.4
Long-term government
bonds
6.1
9.4
Intermediate-term
government bonds
5.6
5.7
U.S. Treasury
bills
3.8
3.1
Inflation
3.1
4.2
Requirement
1:
What range of returns would you expect to see 95 percent of the
time for large-company stocks? (Negative amount should be
indicated by a minus...

Problem 10-18 Return Distributions [LO 3]
Consider the following table for different assets for 1926
through 2011.
Series
Average return
Standard Deviation
Large-company stocks
11.8
%
20.3
%
Small-company stocks
16.5
32.5
Long-term corporate bonds
6.4
8.4
Long-term government bonds
6.1
9.8
Intermediate-term government bonds
5.5
5.7
U.S. Treasury bills
3.6
3.1
Inflation
3.1
4.2
Requirement 1:
What range of returns would you expect to see 68 percent of the
time for large-company stocks? (Negative amount should be
indicated by...

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