Question

According to Investment Digest ("Diversification and the Risk/Reward Relationship", Winter 1994, 1-3), the mean of the annual return for common stocks from 1926 to 1992 was 16.5%, and the standard deviation of the annual was 19%.
In later parts of the question we will ask:
a. What is the probability that the stock returns are greater than 0%?
b. What is the probability that the stock returns are less than 18%?

For this part, answer the following question:
What is the value of the test statistic (C, t, or F) for each part? (Round to 2 decimal digits)

Answer 1

Mean = = 16.5

Standard deviation = = 19

a)

We have to find P(X > 0)

For finding this probability we have to find z score.

That is we have to find P(Z > - 0.87)

P(Z > - 0.87) = 1 - P(Z < - 0.87) = 1 - 0.1926 = 0.8027    ( Using z table)

b)

We have to find P(X < 18)

For finding this probability we have to find z score.

That is we have to find P(Z < 0.08)

P(Z < 0.08) = 0.5315 ( Using z table)

For this part, answer the following question:
What is the value of the test statistic (C, t, or F) for each part? (Round to 2 decimal digits)

Part a) The value of the test statistic is

Part b) The value of the test statistic is