Suppose the average return on Asset A is 6.4 percent and the standard deviation

Question

Suppose the average return on Asset A is 6.4 percent and the standard deviation is 8.4 percent and the average return and standard deviation on Asset B are 3.6 percent and 3.0 percent, respectively. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel® to answer the following questions.

What is the probability that in any given year, the return on Asset A will be greater than 10 percent? Less than 0 percent? (Round your answers to 2 decimal places. (e.g., 32.16))

What is the probability that in any given year, the return on Asset B will be greater than 10 percent? Less than 0 percent? (Round your answers to 2 decimal places. (e.g., 32.16))

In 1979, the return on Asset A was 4.23 percent. How likely is it that such a low return will recur at some point in the future? (Round your answer to 2 decimal places. (e.g., 32.16))

Asset B had a return of 9.40 percent in this same year. How likely is it that such a high return on T -bills will recur at some point in the future?(Round your answer to 2 decimal places. (e.g., 32.16))

Suppose the average return on Asset A is 6.4 percent and the standard deviation is 8.4 percent and the average return and standard deviation on Asset B are 3.6 percent and 3.0 percent, respectively. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel® to answer the following questions.

Explanation / Answer

a
1-normdist(10,6.4,8.4,true)=0.334117571
1-normdist(0,6.4,8.4,true)=0.776941576
b
1-normdist(10,3.6,3,true)=0.016448696
1-normdist(0,3.6,3,true)=0.88493033
c1
probability is zero of a particular return
c2
probability is zero of a particular return

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