6.51

Project Description:

all the major stock market indexes posted heavy losses in 2008. the mean one-year return for the stocks in the s&p 500, a group of 500 very large companies, was -38.5%. the mean one-year return for the nasdq, a group of 3,200 small and medium-sized coompanies, was -40.5%. historically, the one-year returns are approximately normal, the standard deviation in the s&p 500 is approximtely 20%, and the standard deviation in the nasdq is approximately 30%.

1) what is the probability that in the s&p 500 gained value in 2008?

2) what is the probability that a stock in the s&p 500 gained 10% or more?

3) what is the probability that a stock in the s&p 500 lost 50% or more in 2008?

4) what is the probability that a stock in the s&p 500 lost 60% or more in 2008?

5) repeat (1) through (4) for a stock in the nasdq?

6) write a short summary on your findings. be sure to include a discussion of the risks assoiciated with a large standard deviation.
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