Assume that the returns from an asset are normally distributed. The average annu

Question

Assume that the returns from an asset are normally distributed. The average annual return for this asset over a specific period was 14.9 percent and the standard deviation of those stocks in this period was 43.83 percent. What is the approximate probability that your money will double in value in a single year?

What about triple in value? (Round your answer to 6 decimal places. (e.g., 32.161616)) Please show how to find each value.

What about triple in value? (Round your answer to 6 decimal places. (e.g., 32.161616)) Please show how to find each value.

Explanation / Answer

mean = 14.9%

SD = 43.83%

Z = (X-mean)/SD

money is doubled

X given = 100%

Z = (100-14.9)/43.83 = 1.94159

P(X>100) = P(Z>1.94159) = 1-.97391 = .02609 = 2.61%

P(X>200) = P(Z>4.2231) = 1-.99998795 = 0.00001205 = .001205%

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