ires 91 in Chapter on stocks. Andrew plans to retire in 40 years. He plans to invest part of his retirement funds in stocks, so he seeks out intormation on past returns. He learns that from 1966 to 2015, the annual returns on the S&P 500 had mean 11.0% and standard deviation 17.0%.$ The distribution of annual returns on common stocks is roughly symmetric, so the mean return over

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Author:Amos Gilat
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requires
page 91 in Chapter
15.34
He plans to invest part of his retirement funds in
U letu
rns on stocks. Andrew plans to retire in 40 years.
step
stocks, so he seeks out information on past returns. He
learns that from 1966 to 2015, the annual returns on
the S&P 500 had mean 11.0% and standard deviation
1
17.0%.8 The distribution of annual returns on common
stocks is roughly symmetric, so the mean return over
Transcribed Image Text:requires page 91 in Chapter 15.34 He plans to invest part of his retirement funds in U letu rns on stocks. Andrew plans to retire in 40 years. step stocks, so he seeks out information on past returns. He learns that from 1966 to 2015, the annual returns on the S&P 500 had mean 11.0% and standard deviation 1 17.0%.8 The distribution of annual returns on common stocks is roughly symmetric, so the mean return over
Exercises
373
even a moderate number of years is close to Normal.
What is the probability (assuming that the past pattern
of variation continues) that the mean annual return on
common stocks over the next 40 years will exceed 10%?
What is the probability that the mean return will be less
than 5%? Follow the four-step process as illustrated in
Example 15.8.
Transcribed Image Text:Exercises 373 even a moderate number of years is close to Normal. What is the probability (assuming that the past pattern of variation continues) that the mean annual return on common stocks over the next 40 years will exceed 10%? What is the probability that the mean return will be less than 5%? Follow the four-step process as illustrated in Example 15.8.
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