Suppose the returns on long-term government bonds are normally distributed. Assu

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Suppose the returns on long-term government bonds are normally distributed. Assume long-term government bonds have a mean return of 6.5 percent and a standard deviation of 9.8 percent.

Suppose the returns on long-term government bonds are normally distributed. Assume long-term government bonds have a mean return of 6.5 percent and a standard deviation of 9.8 percent.

Suppose the returns on long-term government bonds are normally distributed. Assume long-term government bonds have a mean return of 6.5 percent and a standard deviation of 9.8 percent. Requirement 1: What is the probability that your return on these bonds will be less than -13.1 percent in a given year? Use the NORMDIST function in Excel to answer this question. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (eg., 32.16).) roxabiliy 74.97 3 % Requirement 2: What range of returns would you expect to see 68 percent of the time? (Negative amount should be indicated by a minus sign. Input your answers from lowest to highest to receive credit for your answers. Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) Expected range of returns -- [ 1630096 3.300% to 16.30 0 % Requirement 3: What range would you expect to see 95 percent of the time? (Negative amount should be indicated by a minus sign. Input your answers from lowest to highest to receive credit for your answers. Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) Expected range of returns 13.10 % 26.10 0 %

Explanation / Answer

We have:

Mean = 6.5

SD =9.8

X= -13.1

We can use following formula to compute Z:

Z= (X-M)/ SD

   = (-13.10 – 6.50)/ 9.80

    = -19.60 / 9.80

    = -2

Now using normsdist function:

Normsdist(-2) = 2.28%

So probability would be 2.28%.

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