Question

Assume the returns from holding small-company stocks are normally distributed. Also assume the average annual return for holding the small-company stocks for a period of time was 16.6 percent and the standard deviation of those stocks for the period was 34.3 percent. Use the NORMDIST function in Excel® to answer the following questions.

What is the approximate probability that your money will double in value in a single year? (Do not round intermediate calculations and enter your answer as a percent rounded to 3 decimal places, e.g., 32.161.)

Probability             %

What is the approximate probability that your money will triple in value in a single year? (Do not round intermediate calculations and enter your answer as a percent rounded to 8 decimal places, e.g., 32.16161616.)

Probability             %

Answer 1

Book1 - Excel heam shah - X 9 Share Tell me what you want to do Serv File Home Insert Page Layout Formulas Data Review View Help % Calibri V 11 VAA = - = > Wrap Text Paste BIU-E- A Merge & Center - Clipboard Font Alignment C4 X fi =NORM.DIST(100,16.6,34.3,FALSE) A B C D E F Percentage v .%, 0 0.00 Numbers Delete Format Conditional Format as Cell Formatting Table Styles Styles Insert - Σ' ΑΤΟ Sort & Find & Filter - Select Editing Cells G H I J K L M N O P Q Using Normal distribution for the returns 0.06051% 0.00000072% NMONOEN 20 21 Sheet1 Readly - + 100% A Type here to search 11:58 44 ENG 05-11-2019 20

Here we can see that the  probability of money doubling in value (i.e 100) is 0.06051% and similarly the probability of money tripling in the same year is 0.000000072% (i.e x=200 in the excel formula) . Here the values 100 and 200 are taken, as the money doubles we would love to see a 100% growth , fulfilling our expectations. I hope this answer was a bit help to you guys , any doubts or queries are welcomed . Thank you