# Question

A bank estimates that its profit next year is normally distributed with a mean of 0.8% of assets and the standard deviation of 2% of assets. How much equity (as a percentage of assets) does the company need to be

(a) 99% sure that it will have a positive equity at the end of the year and

(b) 99.9% sure that it will have positive equity at the end of the year? Ignore taxes.

(a) 99% sure that it will have a positive equity at the end of the year and

(b) 99.9% sure that it will have positive equity at the end of the year? Ignore taxes.

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