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 14.6 percent and the standard deviation of those returns in this period was 42.9 percent.What is the approximate probability that your money will double in value in a single year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

**The answer to this is 2.33%, but please read on...as I need help with finding the probability that the money will TRIPLE in value in a single year**

What about triple in value? (Do not round intermediate calculations. Enter your answer as a percent rounded to 6 decimal places, e.g., 32.161616.) - This is what I need help with. Thank you.

What about triple in value? (Do not round intermediate calculations. Enter your answer as a percent rounded to 6 decimal places, e.g., 32.161616.) - This is what I need help with. Thank you.

Explanation / Answer

We require double in value, Return =(2-1)/1 = 100%

Z = (x - Average return)/SD

Z = (100%-14.6%)/42.90%

Z = 1.99

Using Excel formula to calulate probability

Approximate probability that your money will double in value = 1 - normsdist(z)

Approximate probability that your money will double in value = 1- normsdist(1.99)

Approximate probability that your money will double in value = 2.33%

What about triple in value? (Do not round intermediate calculations. Enter your answer as a percent rounded to 6 decimal places, e.g., 32.161616.) - This is what I need help with. Thank you.

We require Triple in value, Return =(3-1)/1 = 200%

Z = (x - Average return)/SD

Z = (200%-14.6%)/42.90%

Z = 4.3217

Using Excel formula to calulate probability

Approximate probability that your money will Triple in value = 1 - normsdist(z)

Approximate probability that your money will Triple in value = 1- normsdist( 4.3217)

Approximate probability that your money will Triple in value = 0.000774%

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