Question

The average return for large-cap domestic stock funds over three years was 14.4%.

You may need to use the appropriate appendix table to answer this question. 

The average return for large-cap domestic stock funds over three years was 14.4%. Assume the three-year returns were normally distributed across funds with a standard deviation of 4.4%. 


(a) What is the probability an individual large-cap domestic stock fund had a three-year return of at least 17%? 

(b) What is the probability an individual large-cap domestic stock fund had a three-year return of 10% or less?

(c) How big does the return have to be to put a domestic stock fund in the top 25% for the three-year period? 

3 0
Add a comment Improve this question Transcribed image text
Answer #1

a)
Here, μ = 14.4, σ = 4.4 and x = 17. We need to compute P(X >= 17). The corresponding z-value is calculated using Central Limit Theorem

z = (x - μ)/σ
z = (17 - 14.4)/4.4 = 0.59

Therefore,
P(X >= 17) = P(z <= (17 - 14.4)/4.4)
= P(z >= 0.59)
= 1 - 0.7224 = 0.2776

b)
P(X <= 10) = P(z <= (10 - 14.4)/4.4)
= P(z <= -1)
= 0.1587

c)
z-value = 0.67

x = 14.4 + 0.67*4.4
x = 17.348

Ans: 17.35 %

Add a comment
Know the answer?
Add Answer to:
The average return for large-cap domestic stock funds over three years was 14.4%.
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • The average return for large-cap domestic stock funds over the three years 2009–2011 was 14.1%. Assume...

    The average return for large-cap domestic stock funds over the three years 2009–2011 was 14.1%. Assume the three-year returns were normally distributed across funds with a standard deviation of 4.4%. Use Table 1 in Appendix B. a. What is the probability an individual large-cap domestic stock fund had a three-year return of at least 20% (to 4 decimals)? b. What is the probability an individual large-cap domestic stock fund had a three-year return of 10% or less (to 4 decimals)?...

  • The average return for large-cap domestic stock funds over the three years 2009–2011 was 14.5%. Assume...

    The average return for large-cap domestic stock funds over the three years 2009–2011 was 14.5%. Assume the three-year returns were normally distributed across funds with a standard deviation of 4.7%. a. What is the probability an individual large-cap domestic stock fund had a three-year return of at least 20% (to 4 decimals)? b. What is the probability an individual large-cap domestic stock fund had a three-year return of 10% or less (to 4 decimals)? c. How big does the return...

  • You may need to use the appropriate appendix table to answer this question. The average return...

    You may need to use the appropriate appendix table to answer this question. The average return for large-cap domestic stock funds over three years was 14.4%. Assume the three-year returns were normally distributed across funds with a standard deviation of 4.4%. (a) What is the probability an individual large-cap domestic stock fund had a three-year return of at least 17%? (Round your answer to four decimal places.) (b) What is the probability an individual large-cap domestic stock fund had a...

  • Exit Submit Assignment for Glduiry ions Exercise 06.18 (Self-Test) Algorithmic Question 3 of 3 Check My Work (2 rem...

    Exit Submit Assignment for Glduiry ions Exercise 06.18 (Self-Test) Algorithmic Question 3 of 3 Check My Work (2 remaining) O Video The average return for large-cap domestic stock funds over t hree years 2009-2011 was 14.5%. Assume the three-year returns were normally distributed across funds with a standard deviation of 4.9%. Use Table 1 in Appendix B. a. What is the probability an individual large-cap domestic stock fund had a three-year return of at least 20% (to 4 decimals)? b....

  • A large cap equity portfolio has a mean return of 11 % and a standard deviation...

    A large cap equity portfolio has a mean return of 11 % and a standard deviation of returns of 17 %. Assuming returns are normally distributed, what is the probability that next year's return will be less than or equal to -5 %? Enter answer as percentage, to two decimal places.

  • Assume the portfolio returns for a large population of large cap equity funds has a standard...

    Assume the portfolio returns for a large population of large cap equity funds has a standard deviation of 6.9 %, and returns are independent across funds. If you are collecting a random sample of fund returns and want the standard deviation of sample mean distribution to be at most 1.5 %, what is the size of the sample you must collect? The answer should be 22.

  • Suppose that a group of mutual funds had an average return of 2% last year with...

    Suppose that a group of mutual funds had an average return of 2% last year with a standard deviation of 3.6%. Assume these funds are normally distributed. What is the probability that a randomly selected fund had a positive return last year?

  • In a random sample of 32 large cap mutual funds, the average YTD return is 3.05%...

    In a random sample of 32 large cap mutual funds, the average YTD return is 3.05% with a standard deviation of 9.77%. Conduct by hand an appropriate hypothesis test at the 5% level to test whether the average YTD return for a large cap mutual fund is positive. (Again, that means to write the hypotheses, compute the test statistic, and estimate the p-value.) Give your test conclusion in terms of the question being asked. Confirm your test statistic and result...

  • A pension fund manager is considering three mutual funds. The first is a stock fund, the...

    A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 4.4%. The probability distributions of the risky funds are: Standard Deviation Expected Return 14% - 5% Stock fund (S) Bond fund (B) 34% 28% The correlation between the fund returns is 0.0214. What is the expected return and standard deviation...

  • A pension fund manager is considering three mutual funds. The first is a stock fund, the...

    A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 4.4%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 14% 34% Bond fund (B) 5% 28% The correlation between the fund returns is 0.0214. What is the expected return and standard deviation for...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT