Question

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 round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
b.	What is the probability that in any given year, the return on Asset B will be greater than 10 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
c-1.	In a particular year, the return on Asset A was −4.24 percent. How likely is it that such a low return will recur at some point in the future? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
c-2.	Asset B had a return of 9.5 percent in this same year. How likely is it that such a high return will recur at some point in the future? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

    

Answer 1