Question 6 The Wall Street Journal reported that almost all the major stock market indexes had posted strong gains in the last 12 months ("What's Hot...and Not," The Wall Street Journal, April 26, 2014, C3). The one year return for the S&P 500, a group of 500 very large companies, was approximately +27%. The one year return in the Russell 2000, a group of 2000 small companies, was approximately +52%. Historically, the one-year returns are approximately normal. The standard deviation in the S&P500 returns is approximately 20%, and in the Russell 2000 the standard deviation is approximately 35%. a. What is the probability that a stock in the S&P500 gained 30% or more in the last year? Gained 60% or more in the last year? b. What is the probability that a stock in the S&P500 lost money in the last year? Lost 30% or more? Repeat (a) and (b) for a stock in the Russell 2000.

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Question 6
The Wall Street Journal reported that almost all the major stock market indexes had posted strong
gains in the last 12 months ("What's Hot...and Not," The Wall Street Journal, April 26, 2014, C3).
The one year return for the S&P 500, a group of 500 very large companies, was approximately +27%.
The one year return in the Russell 2000, a group of 2000 small companies, was approximately +52%.
Historically, the one-year returns are approximately normal. The standard deviation in the S&P500
returns is approximately 20%, and in the Russell 2000 the standard deviation is approximately 35%.
a. What is the probability that a stock in the S&P500 gained 30% or more in the last year? Gained
60% or more in the last year?
b. What is the probability that a stock in the S&P500 lost money in the last year? Lost 30% or
more?
C Repeat (a) and (b) for a stock in the Russell 2000.
Transcribed Image Text:Question 6 The Wall Street Journal reported that almost all the major stock market indexes had posted strong gains in the last 12 months ("What's Hot...and Not," The Wall Street Journal, April 26, 2014, C3). The one year return for the S&P 500, a group of 500 very large companies, was approximately +27%. The one year return in the Russell 2000, a group of 2000 small companies, was approximately +52%. Historically, the one-year returns are approximately normal. The standard deviation in the S&P500 returns is approximately 20%, and in the Russell 2000 the standard deviation is approximately 35%. a. What is the probability that a stock in the S&P500 gained 30% or more in the last year? Gained 60% or more in the last year? b. What is the probability that a stock in the S&P500 lost money in the last year? Lost 30% or more? C Repeat (a) and (b) for a stock in the Russell 2000.
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