Question

2. You are looking at investing in unicorns (firms that have not made a public listing in the stock market). For theso unicorn firms, you know that the return on investment is normally distributed at 10 percent per year with a standard deviation of 5 percent. (40 points) (A) What proportion of firms will carn a return between 0% and 20%? (B) To the nearest percent, find the probability of a firm earning 0% or less per year? If there are 5,000 firms listed on the stock market, then how many firms carn a return of less than 3% a year? (C) To the nearest percent, find the probability of a firm earning 20% return or more in a year. If there are still 5,000 firms listed on the stock market, then how many firms will earn a return of 20% or higher? (D) What rate of return would put a firm in the top 5%?

Answer 1

2) solution: 4:10 $2=x-4 T=5 A) PLOCX220) = P10-10 172 20-10) = P1-22 722) = 10.9544 ] BP(+20)=P(220-10) = P(22-2) 2 1. Plxc 3) = P1223-10) = P(22-14) - 0.0808 Soo, Expected number of listed firms V emp = 5000 x0.0808 404 C) P(x320%) = P12-20-10) = P(232) = 2 % Expected number of firms=5000 x 0.0228 114 -D) Zo scare for to b 5% of firm = 1.64 3 1.64 - X-10 Z- X =) x = 1 18.27