Question: The capital Asset pricing model ( CAPM ) is a financial model that assumes returns on a portfolio are normally distributed. suppose a portfolio has

The capital Asset pricing model (CAPM) is a financial model that assumes returns on a portfolio are normally distributed. suppose a portfolio has an average annual return of 14.7%(i.e. an average gain of 14.7%) with a standard deviation of 33%. A return of 0% means the value of the portfolio doesnt change, a negative return means that the portfolio loses money, and a positive return means that the portfolio gains money. a. what is the probability of this portfolio gaining money between 30% and 50%? b. what is the cutoof for the highest 5%of annual returns with this portfolio (i.e.95th percentile)?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!