Question: Suppose the average return on FTSE TMX Canada long-term bonds is 6.30% and the standard deviation is 7.50% and the average return and standard deviation

Suppose the average return on FTSE TMX Canada long-term bonds is 6.30% and the standard deviation is 7.50% and the average return and standard deviation on T-bills are 3.40% and 3.00%, respectively. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel to answer the following questions.

1-a What is the probability that in any given year, the return on long-term corporate bonds will be greater than 9%? Less than 0%?

1-b What is the probability that in any given year, the return on T-bills will be greater than 9%? Less than 0%?

1-c In 1981, the return on FTSE TMX Canada long-term bonds was -4.30%. What is the probability that such a low return will recur at some point in the future?

1-d T-bills had a return of 10.10% in this same year. What is the probability that such a high return on T-bills will recur at some point in the future?

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