The annual average return of S&p 500 from 1950-2002 was calculated as 9.7% with the standard deviation of 15.5% (Source: Hirshey, 2003). A person, who is going to retire in 40 years, wants to invest in stocks. a. Assuming that the above annual returns have been impacted by extreme values, comment on the normality of the stock return over the next 49 years. b. What is the probability that the mean return will be more than 15%? c. What is the probability that the mean return is less that 5%?

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Estimation

A new framework of data analysis where the new statistical methods are used for interpreting the results and analyzing the data is known as estimation in statistics.