The major stock market indexes had strong results in 2014. The mean one-year return for stocks...

The major stock market indexes had strong results in 2014. The mean one-year return for stocks in the S&P 500, a group of 500 very large companies was +11.4%. The mean one year return for the NASDAQ, a group of 3200 small and medium-sized companies was +13.4%. Historically, the one-year returns are approximately normal, the standard deviation in the S&P 500 is approximately 20% and the standard deviation in NASDAQ is approximately 30%.

What is the probability that a stock in the S&P 500 gained value in 2014?
What is the probability that a stock in the S&P 500 gained 10% or more in 2014?
What is the probability that a stock in the S&P 500 lost 20% or more in 2014?
What is the probability that a stock in the S&P 500 lost 30% or more in 2014?
Repeat (a) through (d) for a stock in the NASDAQ.
Write a short report on your findings Be sure to include a discussion on the risks associated with a large standard deviation. How would you use the findings to provide advice on investing in the S&P 500 or NASDAQ stock market?

Please explain how you get the answer to x (or Z) step by step

Expert Solution

orchestra answered 1 year ago

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3. Assume you had two stocks. Stock A had an expected return of 20% and a...

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