The major stock market indexes had strong results in 2016. The mean one-year return for stocks in

Question:

The major stock market indexes had strong results in 2016. The mean one-year return for stocks in the S&P 500, a group of 500 very large companies, was +9.54%. The mean one-year return for the NASDAQ, a group of 3,200 small and medium-sized companies, was +7.50%. Historically, the one-year returns are approximately normally distributed, the standard deviation in the S&P 500 is approximately 20%, and the standard deviation in the NASDAQ is approximately 30%.

a. What is the probability that a stock in the S&P 500 gained value in 2016?

b. What is the probability that a stock in the S&P 500 gained 10% or more in 2016?

c. What is the probability that a stock in the S&P 500 lost 20% or more in 2016?

d. What is the probability that a stock in the S&P 500 lost 30% or more in 2016?

e. Repeat (a) through (d) for a stock in the NASDAQ.

f. Write a short summary on your findings. Be sure to include a discussion of the risks associated with a large standard deviation.

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...

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