The Capital Asset Pricing Model (CAPM) is a financial model that assumes returns on a portfolio are normally distributed. Suppose a portfolio has on average annual return of 15% (i.e. an average gain of 15%) with a standard deviation 30%. 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. 5.1 If you invested money in this portfolio for one year, what is the probability that you would lose money, i.e. have a return less than 0%? (Use the Z table in the folder to find the probability.) 5.2 If you invested money in this portfolio for one year, what is the probability that your annual return is between 12% and 18%? (Use the Z table in the folder to find the probability.) 5.3 If you invested money in this portfolio for one year, what is the 90th percentile of your annual return? (Use the Z table in the folder to find the probability.)

For Z3.50, the probability is less than or equal to 0.0002 . Positive Z For Z3.50, the probability is greater than or equal to 0.9998