Question

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Problem 12-24 Using Probability Distributions [LO3 10 Suppose the average return on Asset A is 6.4 percent and the standard deviation is 8.4 percent, and the average return and standard deviation on Asset B are 3.6 percent and 3 percent, respectively. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel to answer the following questions. 10 points What is the probability that in any given year, the return on Asset A will be greater than 10 percent? Less than O percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the probability that in any given year, the return on Asset B will be greater than 10 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. c-1. In a particular year, the return on Asset A was -4.23 percent. How likely is it that such a low return will recur at some point in the future? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-2. Asset B had a return of 9.4 percent in this same year. How likely is it that such a high return will recur at some point in the future? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) а. Skipped Greater than 10 percent % а. Less than 0 percent Greater than 10 percent b. % Less than 0 percent % c-1. Probability c-2. Probability %

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

AS ASKED, I HAVE USED NORMDIST FUNCTION.

WHENEVER LESS THAN PROBABILITY IS TO BE USED, USE "NORMDIST" STRAIGHT WAY. WHENEVER MORE THAN PROBABILITY IS ASKED, WE HAVE TO CALCULATE " 1- NORMDIST"

- 2x Fill ZI TU STATS - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Σ AutoSum : A Calibri -11AA = = = Dr Wrap Text General Ea Copy Paste B I U - D A Merge & Center $ - % Format Painter 8. Conditional Format Cell Insert Delete Format Sort & Find & Formatting as Table Styles 2 Clear Filter Select Clipboard Font Alignment Number Styles Cells Editing 1566 - fix 2 м м о р а к U V W X Y 565 566 567 568 569 ASSET A ASSET B 570 AVERAGE RETURN = 6.4 AVERAGE RETURN = 3.6 571 SD = 8.4 SD = 572 573 X= 10 574 PROBABILITY THAT RETURN ON ASSET A WILL BE GREATER THAN 10% 33.41% [=1- NORM.DIST(P573,P570,P571,1)] 575 576 X= 577 PROBABILITY THAT RETURN ON ASSET A WILL BE LESS THAN 0% 22.31% [=NORM.DIST(P576,P570,P571,1)] 578 579 b X = 10 580 PROBABILITY THAT RETURN ON ASSET B WILL BE GREATER THAN 10% 1.64% (=1 - NORM.DIST(P579,T570, T571,1)] 581 582 X= 583 PROBABILITY THAT RETURN ON ASSET B WILL BE LESS THAN 0% 11.51% [= NORM.DIST(P582,7570,1571,1)] 584 P V FV DIVIDEND EMV MEAN STDV assignment DEAR Sheet2 COV TIME SERIES corr REGRESSION range CAMERA TREND fregMATRIX INTERVAL, NORMAL HYPOTHIC Rea ferences BOU 120% DO 90 * 410 ENG H 08-11-2019

- 2x Find & Select Y STATS - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Σ AutoSum : A Calibri -11AA = = = Dr Wrap Text General Ea Copy Fill Paste B I U - D A Merge & Center $ - % Format Painter 8. Conditional Format Cell Insert Delete Format Sort & Formatting as Table Styles 2 Clear Filter Clipboard Font Alignment Number Styles Cells Editing T603 M N O P Q R V W X 584 C-1 X = -4.23 586 PROBABILITY THAT SUCH LOW RETURN OCCUR 10.29% (=NORM.DIST(P585,P570,P571,1)] 587 588 C-2 X = 9.4 589 PROBABILITY THAT SUCH LOW RETURN OCCUR 2.66% [=1 - NORM.DIST(P588,T570,T571,1)] 590 591 585 592 593 594 595 596 597 598 599 600 601 602 603 604 H P EMV MEAN STDV assignment DEAR Sheet2 COV TIME SERIES corr REGRESSION range CAMERA TREND V FV DIVIDEND ferences Red fregMATRIX INTERVAL, NORMAL HYPOTHIC 20J 120% + ODOB 9 * 10 ENG 08-11-2019