Question

In: Finance

Suppose that the returns on an investment are normally distributed with an expected return of 8%...

Suppose that the returns on an investment are normally distributed with an expected return of 8% and standard deviation of 4%. What is the likelihood of making a negative return? (Hint: the area under a curve for 1 std dev is 34.13%, 2 std dev is 47.73% and 3 std dev is 49.87%).


A. 47.73%
B. 34.13%
C. 15.87%
D. 2.27%

Solutions

Expert Solution

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Suppose the returns on an asset are normally distributed. The historical average annual return for the...
Suppose the returns on an asset are normally distributed. The historical average annual return for the asset was 7.3 percent and the standard deviation was 8.4 percent. What is the probability that your return on this asset will be less than –4.5 percent in a given year? Use the NORMDIST function in Excel® to answer this question. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Probability 8.0 % What range...
Suppose the returns on an asset are normally distributed. The historical average annual return for the...
Suppose the returns on an asset are normally distributed. The historical average annual return for the asset was 6.7 percent and the standard deviation was 12.6 percent.      What range of returns would you expect to see 95 percent of the time? (Enter your answers for the range from lowest to highest. A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)...
Suppose the returns on an asset are normally distributed. The historical average annual return for the...
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 is the probability that your return on this asset will be less than –7.3 percent in a given year? Use the NORMDIST function in Excel® to answer this question. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What range...
Suppose that the annual return, R on a share is normally distributed with an expected annual...
Suppose that the annual return, R on a share is normally distributed with an expected annual return of 10% and an annual standard deviation of 20%. Find using the Table of the normal distribution provided, the probability that the annual return on the share will: (i) Be positive. [2] (ii) Be less than -5%. [2] (iii) Lie between 5% and 15%. [2] (iv) Be within one standard deviation of zero. [2] (v) Be within one standard deviation of its mean....
The return of a portfolio is normally distributed with a mean return of 8% and risk...
The return of a portfolio is normally distributed with a mean return of 8% and risk of 10%. What is the probability that this portfolio's return is between 18% and 27.6%?
Suppose the returns on long-term corporate bonds are normally distributed. The average annual return for long-term...
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 6.7 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 -3.6 percent in a given year? (Do not round intermediate calculations.)       (Click to select)14.21%12.98%13.66%14.34%27.32%      (b) What range of returns would...
Assume that the returns from an asset are normally distributed. The average annual return for this...
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...
QUESTION 4: The returns for an asset are normally distributed. The mean return is 9.75% and...
QUESTION 4: The returns for an asset are normally distributed. The mean return is 9.75% and the standard deviation is 3.25%. a. What is the probability of earning a negative return? (3 points) b. What is the probability of earning a return between 6.5% and 16.25%? (3 points) c What is the probability of earning a return greater than 13%? (3 points)
Assume that the returns from an asset are normally distributed. The average annual return for this...
Assume that the returns from an asset are normally distributed. The average annual return for this asset over a specific period was 17.2 percent and the standard deviation of those returns in this period was 43.53 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. Suppose the returns of a particular group of mutual funds are normally distributed with a...
1. Suppose the returns of a particular group of mutual funds are normally distributed with a mean of 9.7% and a standard deviation of 3.8%. If the manager of a particular fund wants to be sure that his fund is NOT in the bottom 25% of funds with the lowest return, what return must his fund have? (please round your answer to 2 decimal places). 2. Suppose the following data show the prices of 4 cars with similar characteristics that...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT