5.(15 points) Based on historical data for the 1926-2011 period, the average return and the standard...
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5.(15 points) Based on historical data for the 1926-2011 period, the average return and the standard deviation of the return for the large-company stocks are 11.8% and 20.3%, respectively. Assume the returns from the large-company stocks are normally distributed. You expect the aggregate stock market, as proxied by the S&P 500 Index, will generate a return of 12% this coming year. Suppose you have $100,000 to invest in the Fidelity Large-Cap Equity Index Fund, a mutual fund that replicates the returns from large-cap stocks. What is the probability that your investment will outperform the market this coming year? That is, what is the probability that your investment will earn at least 12 % this coming year? Also what is the probability that your investment will lose money this coming year? I 5.(15 points) Based on historical data for the 1926-2011 period, the average return and the standard deviation of the return for the large-company stocks are 11.8% and 20.3%, respectively. Assume the returns from the large-company stocks are normally distributed. You expect the aggregate stock market, as proxied by the S&P 500 Index, will generate a return of 12% this coming year. Suppose you have $100,000 to invest in the Fidelity Large-Cap Equity Index Fund, a mutual fund that replicates the returns from large-cap stocks. What is the probability that your investment will outperform the market this coming year? That is, what is the probability that your investment will earn at least 12 % this coming year? Also what is the probability that your investment will lose money this coming year? I
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