The standard normal distribution Has a mean 0 a standard deviation of 1. Has a m

Question

The standard normal distribution Has a mean 0 a standard deviation of 1. Has a mean of 1 and a variance of 0. Has a total of area under the curve equal to 0.5. Converts area under a normal curve to the distance a standard deviation is above or below. In 2007, 2008, 2009, and 2010, a stock and bond portfolio returned 8%, 14%, 7%, and 16% respectively. Using the equation GM = b Squareroot (1 + r_2) (1 + r_2), ....., (1 + r_6) - 1, Calculate the return of the portfolio for the last four years. (Round to the nearest hundredths) 7.35% 8.47% 9.56% 10.23%

Explanation / Answer

Result:

20 a. has mean 0 and standard deviation 1.

21).

%

proportion p

p+1

8

0.08

1.08

14

0.14

1.14

-7

-0.07

0.93

16

0.16

1.16

Multiplied vale

1.328219

GM = ( (1+r1)* (1+r2)* (1+r3)* (1+r4))1/4 -1

= ( 1.3282191/4 -1

=1.0735 -1

=0.0735

Or    7.35%

Answer: a). 7.35%

%

proportion p

p+1

8

0.08

1.08

14

0.14

1.14

-7

-0.07

0.93

16

0.16

1.16

Multiplied vale

1.328219

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