Probability-return for common stocks

Reference no: EM1316175

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 15.4%, and the standard deviation of the annual return was 24.5%. During the same 67-year time span, the mean of the annual return for long-term government bonds was 5.5%, and the standard deviation was 6.0%. The article claims that the distributions of annual returns for both common stocks and long-term government bonds are bell-shaped and approximately symmetric. Assume that these distributions are distributed as normal random variables with the means and standard deviations given previously.

a. Find the probability that the return for common stocks will be greater than 0%.

b. Find the probability that the return for common stocks will be less than 20%.

Reference no: EM1316175

Questions Cloud

System of two equations : System of two equations.

What is the probability of the bearings failing : Four wheel bearings have been replaced on a company car. The mechanic has selected 4 bearings from a large supply bin. The mechanic is unaware that 10 percent of the bearings fail within the first 100 miles.

Objective type questions on capital structure and leverages : Objective type questions on Capital Structure and Leverages However the company's CFO does estimate that it will increase the company's earnings per share

Find the equilibrium expected growth rate : Calculation of equilibrium expected growth rate - The dividend is expected to grow at some constant rate, g, forever. Find the equilibrium expected growth rate?

Probability-return for common stocks : Find out the probability that the return for common stocks will be more than 0%.

The subsiquent cost tree illustrate the expected outcome : Find out the Expected value of the perfect information for the given problem. Given the subsiquent cost tree, illustrate what is the expected outcome.

What should the average weight be if the production manager : The weight of a product is normally distributed with a standard deviation of .5 ounces. What should the average weight be if the production manager wants no more than 5 percent of the products to weight more than 5.10 ounces.

Computation of sustainable growth rate : Computation of sustainable growth rate and Can Stieben's actual growth rate in sales be different from its sustainable growth rate? Why or why not? How can Stieben change its sustainable growth?

Derivations for marginal utility : Derive an expression for the marginal utility of good 1, and for the marginal utility of good 2. Using these, solve for an expression describing the slope of an indifference curve: MRS(x1,x2).

User Account

All Pages