Question

according to investment digest (diversification and the risk/reward relationship, winter 1994, 1-3), the mean of the annual return for common stocks from 1926 to 1992 was 16.5% and the standard deviation of the annual return was 19%.what is the probability that the stock returns are greater than 17%.

Answer 1

Answer:

0.488

Explanation:

Mean annual return for common stocks = 16.5%

standard deviation of annual return = 19%

Determine the probability that the stock returns are greater than 17%

P ( Stock returns > 17% )

stock returns = x

= 1 - p ( x - μ / 6  <  17 - 16.5 / 19 )

∴ 1 - p ( Z < 0.03 )

= 1 - 0.5120 = 0.488