What is the probability that all of equity

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A company estimates that its profit over each calendar year is normally distributed with a mean of 1.5% of assets per year and a standard deviation of 2.5% of assets per year.

a) How much equity as a percentage of assets does the company currently need to have in order to be 99% sure that its equity will not fall below 5% of its assets at the end of two years?

b) If the company currently has equity that is 5% of its assets, what is the probability that all of its equity will be wiped out at the end of three years? Ignore taxes. Remember to show your work.

Reference no: EM132845684

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