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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
ch 12
#7
Suppose the average return on Asset A is 7.0 percent and the standard deviation is 8.2 percent and the average return and standard deviation on Asset B are 4.1 percent and 3.5 percent, respectively. Further assume that the returns are normally distributed. Use the NORMDIST function in ExcelA?® to answer the following questions.
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| a. |
What is the probability that in any given year, the return on Asset A will be greater than 11 percent? Less than 0 percent? (Round your answers to 2 decimal places. (e.g., 32.16)) |
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| Â | Â |
| Â Â Greater than 11 percent | % |
| Â Â Less than 0 percent | % |
| Â | |
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| b. |
What is the probability that in any given year, the return on Asset B will be greater than 11 percent? Less than 0 percent? (Round your answers to 2 decimal places. (e.g., 32.16)) |
Â
| Â | Â |
| Â Â Greater than 11 percent | % |
| Â Â Less than 0 percent | % |
| Â | |
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| c-1 |
In 1979, the return on Asset A was Acˆ’4.37 percent. How likely is it that such a low return will recur at some point in the future? (Round your answer to 2 decimal places. (e.g., 32.16)) |
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| Â Â Probability | % |
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| c-2 |
Asset B had a return of 10.80 percent in this same year. How likely is it that such a high return on T -bills will recur at some point in the future?(Round your answer to 2 decimal places. (e.g., 32.16)) |
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| Â Â Probability | % |
15.
An asset has had an arithmetic return of 11.60 percent and a geometric return of 9.60 percent over the last 80 years. What return would you estimate for this asset over the next 5 years? 20 years? 36 years? (Round your answers to 2 decimal places. (e.g., 32.16))
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| Future annual returns | |
| Â Â 5 years | % |
| Â Â 20 years | % |
| Â Â 36 years | % |
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