Question

Suppose the returns on long-term government bonds are normally distributed. Assume long-term government bonds have a mean return of 6.1 percent and a standard deviation of 9.7 percent. Requirement 1: What is the approximate probability that your return on these bonds will be less than -13.3 percent in a given year? (Do not include the percent sign (%). Round your answer to 2 decimal places (e.g., 32.16).) Probability 7% Requirement 2: What range of returns would you expect to see 68 percent of the time? (Do not include the percent signs (%). Negative amount should be indicated by a minus sign. Input your answers from lowest to highest to receive credit for your answers. Round your answers to 2 decimal places (e.g., 32.16).) Expected range of returns O % to D % Requirement 3: What range would you expect to see 95 percent of the time? (Do not include the percent signs (%). Negative amount should be indicated by a minus sign. Input your answers from lowest to highest to receive credit for your answers. Round your answers to 2 decimal places (e.g., 32.16).) Expected range of returns O % to 0 %

Answer 1

A в C E 2.28% 14 a) Probability of return less than -3.5% NORMDIST(-13.3%, 6. 1%,9.7%,TRUE) 15 16 17 b) At 68%: Expected range of returns Mean-Standard deviations Mean+Standard deviations 18 to 15.80% -3.60% Expected range of returns to 19 -6.1%+9.7% -6.1 %-9.7% 20 21 22 c) At 95%: Expected range of returns Mean-[2xStandard deviations] Mean+[2xStandard deviations] 23 to 25.50% -13.30% Expected range of returns to 24 6.1%+2*9.7% -6.1%-2*9.7% 25

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