The yearly return on a common stock is normally distributed with a mean of 8% an
ID: 2923142 • Letter: T
Question
The yearly return on a common stock is normally distributed with a mean of 8% and a standard deviation of 4%. Use this information to answer the next five questions. 14. The expected yearly return on the common stock is what percent? 15, what is the probability that the yearly return on this common stock is between 26% and 10%? 16. Sixty-seven percent of the time the yearly return on this common stock is less than what percent? 1 That is, find the 67th percentile of this distribution. 17.One and one-half percent of the time the yearly return on this common stock exceeds what percent return? That is, find Xo, such that P(X>Xo)0.0150. 18. What is the probability that this common stock will lose money? Reading and Writing:Explanation / Answer
Mean = 8%, Stdev = 4$
14.E(X) = Mean = 8%
15.p(2.6%<X<10%) = p(2.6-4 / 8<Z<10-8/4) = P(-1.4/8 <Z< 2/4) =P(-0.18<Z<.5) = .6915-.4286 = .2629
16.P(x<c) = .67 , Z=.44 for this. So, P(Z<.44) = .67, c-8/4 = .67, c = (.67)*4+8 = 10.68
17.P(X>X0) = .0150, Z = 2.17, So, X0 = 2.17*4 + 8 = 16.68%
18. P(will loose money) = P(X<0) = P(Z<0-8/4) = P(Z<-2) = .025
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