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Homework answers / question archive / For each investment class in Table 3, assume that future returns are normally distributed with the population mean and standard deviation as given

For each investment class in Table 3, assume that future returns are normally distributed with the population mean and standard deviation as given

Math

For each investment class in Table 3, assume that future returns are normally distributed with the population mean and standard deviation as given. Based on this assumption:

  1. For each investment class, find the probability of a return that is less than zero (that is, find the probability of a loss). Is your answer reasonable for all investment classes? Explain. 
  2. For each investment class, find the probability of a return that is: 
    1. Greater than 5%.
    2. Greater than 10%. 
    3. Greater than 20%. 
    4. Greater than 50%. 
  3. For which investment classes is the probability of the return greater than 50% is essentially zero? For which investment classes is the probability of such a return greater than 1 percent? Greater than 5%? 
  4. For which investment classes is the probability of loss essentially zero? 
  5. For which investment classes is the probability of loss greater than 1%? Greater than 10%? Greater than 20%?

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