How many stocks must the web site include

Reference no: EM13925154

A current get-rich-quick Web site guarantees that over the next 3 months, at least three stocks mentioned on the site will exhibit annualized returns of at least 300 percent. Assuming that all stock returns are independent, normally distributed, and with expected annual returns of 12 percent and risk of 35 percent, (a) what is the probability that over one quarter at least 3 stocks out of 500 exhibit annualized returns of at least 300%? (b) How many stocks must the Web site include for this probability to be 50 percent? (c) Identify at least two real-world deviations from the above assumptions, and discuss how they would affect the calculated probabilities.

Reference no: EM13925154

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