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In: Statistics and Probability

Historically, the one-year returns follow approximately the normal distribution. The one-year return for the S&P 500...

Historically, the one-year returns follow approximately the normal distribution. The one-year return for the S&P 500 was +27% (that is, 0.27) and its standard deviation is 20% (that is, 0.2). What is the probability that a stock in the S&P 500 gained 30% or more last year?

(a) 0.0668 (i.e., 6.68%)
(b) 0.4404 (i.e., 44.04%)
(c) 0.5596 (i.e., 55.96%)
(d) 0.9332 (i.e., 93.32%)

What is the probability that a stock in the S&P 500 lost 10% or more last year?

(a) 0.1814 (i.e., 18.14%)
(b) 0.0082 (i.e., 0.82%)
(c) 0.0322 (i.e., 3.22%)
(d) 0.0743 (i.e., 7.43%)

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Expert Solution

orchestra answered 1 year ago
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