Course question

 

For each investment class in Table 3, assume that future returns are normally distributed with the population mean and standard deviation as given. Based on this assumption:

  1. For each investment class, find the probability of a return that is less than zero (that is, find the probability of a loss). Is your answer reasonable for all investment classes? Explain. 
  2. For each investment class, find the probability of a return that is: 
    1. Greater than 5%.
    2. Greater than 10%. 
    3. Greater than 20%. 
    4. Greater than 50%. 
  3. For which investment classes is the probability of the return greater than 50% is essentially zero? For which investment classes is the probability of such a return greater than 1 percent? Greater than 5%? 
  4. For which investment classes is the probability of loss essentially zero? 
  5. For which investment classes is the probability of loss greater than 1%? Greater than 10%? Greater than 20%?