Answer:
Explanation:
Let us follow this accordingly
a. We have that ;
Z is given as = (X-mean)/standard deviation
where X = 10, mean = 6.9 and standard deviation is 8.1 ------- for A
inputting values we have;
Z = (10-6.9)/8.1 = 0.3827
Using the NORMDIST function in excel, [NORMDIST(0.3827)] = 0.649. This is the probability of earning less than 10%.
Hence the probability of earning more than 10% = 1-0.649 = 0.351 or 35.1%
b. At less than 0%;
X = 0, mean = 6.9 and standard deviation is 8.1
Thus Z = (0-6.9)/8.1 = - 0.8519. Using the NORMDIST function in excel, [NORMDIST(-0.8519)] = 0.1971 or 19.71%.
From this, the probability of earning less than 0% = 19.71%
c. Also For B;
X = 10%, mean = 4% and standard deviation = 3.5%
inputting values gives us ;
Z = (10-4)/3.5 = 1.7143.
Using the NORMDIST function in excel, [NORMDIST(1.7143)] = 0.9568. This is the probability of earning less than 10%.
Which makes the probability of earning more than 10% = 1-0.9568 = 0.0432 i.e 4.32%
d. Als, X = 0.
Giving us;
Z = (0-4)/3.5 = -1.1429.
Using the NORMDIST function in excel, [NORMDIST(-1.1429)] = 0.1265 or 12.65%
Thus the probability of earning less than 0% = 12.65%
e. Return on A = -4.36%
Thus z = (-4.36 - 6.9)/8.1 = -1.39. NORMDIST of -1.39 = 0.0822 or 8.22%
f. Return of B = 10.7%
Thus z = (10.7% - 4)/3.5 = 1.9143.
Its NORMDIST = 0.9722
This makes the probability of earning less than 10.7%.
Thus required probability gives us = 1-0.9722 = 2.78%
