1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Ksivusya [100]
3 years ago
9

Andrew plans to retire in 32 years. He plans to invest part of his retirement funds in stocks, so he seeks out information on pa

st returns. He learns that over the entire 20th century, the real (that is, adjusted for inflation) annual returns on U.S. common stocks had mean 8.7% and standard deviation 20.2%. The distribution of annual returns on common stocks is roughly symmetric, so the mean return over even a moderate number of years is close to Normal.
(a) What is the probability (assuming that the past pattern of variation continues) that the mean annual return on common stocks over the next 40 years will exceed 13%?
(b) What is the probability that the mean return will be less than 8%?
Mathematics
1 answer:
Debora [2.8K]3 years ago
8 0

Answer:

a) 0.0885 = 8.85% probability that the mean annual return on common stocks over the next 40 years will exceed 13%.

b) 0.4129 = 41.29% probability that the mean return will be less than 8%

Step-by-step explanation:

To solve this question, we need to understand the normal probability distribution and the central limit theorem.

Normal Probability Distribution:

Problems of normal distributions can be solved using the z-score formula.

In a set with mean \mu and standard deviation \sigma, the z-score of a measure X is given by:

Z = \frac{X - \mu}{\sigma}

The Z-score measures how many standard deviations the measure is from the mean. After finding the Z-score, we look at the z-score table and find the p-value associated with this z-score. This p-value is the probability that the value of the measure is smaller than X, that is, the percentile of X. Subtracting 1 by the p-value, we get the probability that the value of the measure is greater than X.

Central Limit Theorem

The Central Limit Theorem estabilishes that, for a normally distributed random variable X, with mean \mu and standard deviation \sigma, the sampling distribution of the sample means with size n can be approximated to a normal distribution with mean \mu and standard deviation s = \frac{\sigma}{\sqrt{n}}.

For a skewed variable, the Central Limit Theorem can also be applied, as long as n is at least 30.

Mean 8.7% and standard deviation 20.2%.

This means that \mu = 8.7, \sigma = 20.2

40 years:

This means that n = 40, s = \frac{20.2}{\sqrt{40}}

(a) What is the probability (assuming that the past pattern of variation continues) that the mean annual return on common stocks over the next 40 years will exceed 13%?

This is 1 subtracted by the pvalue of Z when X = 13. So

Z = \frac{X - \mu}{\sigma}

By the Central Limit Theorem

Z = \frac{X - \mu}{s}

Z = \frac{13 - 8.7}{\frac{20.2}{\sqrt{40}}}

Z = 1.35

Z = 1.35 has a pvalue of 0.9115

1 - 0.9115 = 0.0885

0.0885 = 8.85% probability that the mean annual return on common stocks over the next 40 years will exceed 13%.

(b) What is the probability that the mean return will be less than 8%?

This is the pvalue of Z when X = 8. So

Z = \frac{X - \mu}{s}

Z = \frac{8 - 8.7}{\frac{20.2}{\sqrt{40}}}

Z = -0.22

Z = -0.22 has a pvalue of 0.4129

0.4129 = 41.29% probability that the mean return will be less than 8%

You might be interested in
Ali and Bruno both run the 400 meter dash for their track team. Their coach frequently records their finishing times (in seconds
sergey [27]

Answer:

.07

Step-by-step explanation:

5 0
3 years ago
Question 7.<br> identify the zeros of the graphed function<br> A) -2,2<br> B)-2,0,2<br> C)-2<br> D)2
photoshop1234 [79]

Answer:

-2,0 0,-8 , 2,0 hope that helps

7 0
3 years ago
The amount of toothpaste in a tube is normally distributed with a mean of 6.5 ounces and a standard
Anarel [89]

Answer:

a) 266 tubes ,  TC_r = $53.2

b) 266 tubes ,  T.Loss = $13.30

Step-by-step explanation:

Given:

- The sample size of tubes n = 1,000 tubes

- The mean of the sample u = 6.5 oz

- The standard deviation of the sample s.d = 0.8 oz

- Cost of manufacturing a tube C_t = 50 cents

- Cost of refilling a tube C_r = 20 cents

- Profit loss per tube Loss = 5 cents

Find:

a). How many tubes will be found to contain less than 6 ounces? In that case, what will be the total cost of the  refill?

b) How many tubes will be found to contain more than 7 ounces? In that case, what will be the amount of  profit lost?

Solution:

- First we will compute the probability of tube containing less than 6 oz.

- Declaring X : The amount of toothpaste.

Where,                         X ~ N ( 6.5 , 0.8 )

- We need to compute P ( X < 6 oz )?

Compute the Z-score value:

                  P ( X < 6 oz ) =  P ( Z < (6 - 6.5) / 0.8 ) = P ( Z < -0.625 )

Use the Z table to find the probability:

                               P ( X < 6 oz ) = P ( Z < -0.625 ) = 0.266

- The probability that it lies below 6 ounces. The total sample size is n = 1000.

       The number of tubes with X < 6 ounces = 1000* P ( X < 6 oz )

                                                                           = 1000*0.266 = 266 tubes.

- The total cost of refill:

                            TC_r = C_f*(number of tubes with X < 6)

                            TC_r = 20*266 = 5320 cents = $53.2

- We need to compute P ( X > 7 oz )?

Compute the Z-score value:

                  P ( X > 7 oz ) =  P ( Z > (7 - 6.5) / 0.8 ) = P ( Z < 0.625 )

Use the Z table to find the probability:

                               P ( X > 7 oz ) = P ( Z > 0.625 ) = 0.266

- The probability that it lies above 7 ounces. The total sample size is n = 1000.

       The number of tubes with X > 7 ounces = 1000* P ( X > 7 oz )

                                                                           = 1000*0.266 = 266 tubes.

- The total cost of refill:

                            T.Loss = Loss*(number of tubes with X > 7)

                            T.Loss = 5*266 = 1330 cents = $13.30

5 0
3 years ago
Answer number 14. It’s very difficult for me and i need some help.
professor190 [17]

Answer:

1201.2 in (100.1ft)

Step-by-step explanation:

A scale model represents a ratio. All sides must be shrunk or increased based on a constant value. In this case the ratio of the model is 1/13 the size of the original giving us a 1:13 ratio. So each side of your scale model must be multiplied by 13 to find the real value of the side.

First convert all units to inches then divide the width of the real windmill by the width of the scale model (both in inches) you will see the answer is 13. Multiply the inch values of all sides of your model by 13 and this gives you the proportional value of each side of the real windmill in relation to the scale model.

5 0
2 years ago
Find the sum of the measures of the interior angles of the polygon. 15-gon A. 2340° B. 2520° C. 2160° D. 1170°
Thepotemich [5.8K]

Answer:

2340

Step-by-step explanation:

Formulae for sum of interior angles is 180(n-2)

Whereby n=number of sides

180(15 - 2) \\ 180(13) \\  = 2340degrees

8 0
3 years ago
Other questions:
  • Line j is perpendicular to the line with the given equation and the line j passes through p. write an equation of line j
    10·1 answer
  • Identify a possible first step using the elimination method to solve the system and then find the solution to the system. 3x - 5
    7·2 answers
  • Is one half equal to 7/12
    8·2 answers
  • Using the information above regarding the proportion of agenda-less meetings, choose the correct conclusion for this hypothesis
    7·1 answer
  • The table below shows the values for the function y=f(1/5x)
    9·1 answer
  • Find the sum of the angle measures in a regular polygon.
    14·2 answers
  • Help asap!!<br><br><br>hhhhhhhhhhhhhhhhghhhhh​
    7·1 answer
  • Somebody pls help I’m doin a exam!!!!
    15·2 answers
  • javier buys 3 postcards during each day of vacation. how many days will javier have to spend on vacation before he will have bou
    9·1 answer
  • PLEASE ANSWER ASAP
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!