Andrew plans to retire in 32 years. He plans to invest part of his retirement funds in stocks, so he seeks out information on past returns. He learns that over the entire 20th century, the real (that is, adjusted for inflation) annual returns on U.S. common stocks had mean 8.7% and standard deviation 20.2%. The distribution of annual returns on common stocks is roughly symmetric, so the mean return over even a moderate number of years is close to Normal.
(a) What is the probability (assuming that the past pattern of variation continues) that the mean annual return on common stocks over the next 40 years will exceed 13%?
(b) What is the probability that the mean return will be less than 8%?

Answers

Answer 1

Answer:

a) 0.0885 = 8.85% probability that the mean annual return on common stocks over the next 40 years will exceed 13%.

b) 0.4129 = 41.29% probability that the mean return will be less than 8%

Step-by-step explanation:

To solve this question, we need to understand the normal probability distribution and the central limit theorem.

Normal Probability Distribution:

Problems of normal distributions can be solved using the z-score formula.

In a set with mean [tex]\mu[/tex] and standard deviation [tex]\sigma[/tex], the z-score of a measure X is given by:

[tex]Z = \frac{X - \mu}{\sigma}[/tex]

The Z-score measures how many standard deviations the measure is from the mean. After finding the Z-score, we look at the z-score table and find the p-value associated with this z-score. This p-value is the probability that the value of the measure is smaller than X, that is, the percentile of X. Subtracting 1 by the p-value, we get the probability that the value of the measure is greater than X.

Central Limit Theorem

The Central Limit Theorem estabilishes that, for a normally distributed random variable X, with mean [tex]\mu[/tex] and standard deviation [tex]\sigma[/tex], the sampling distribution of the sample means with size n can be approximated to a normal distribution with mean [tex]\mu[/tex] and standard deviation [tex]s = \frac{\sigma}{\sqrt{n}}[/tex].

For a skewed variable, the Central Limit Theorem can also be applied, as long as n is at least 30.

Mean 8.7% and standard deviation 20.2%.

This means that [tex]\mu = 8.7, \sigma = 20.2[/tex]

40 years:

This means that [tex]n = 40, s = \frac{20.2}{\sqrt{40}}[/tex]

(a) What is the probability (assuming that the past pattern of variation continues) that the mean annual return on common stocks over the next 40 years will exceed 13%?

This is 1 subtracted by the pvalue of Z when X = 13. So

[tex]Z = \frac{X - \mu}{\sigma}[/tex]

By the Central Limit Theorem

[tex]Z = \frac{X - \mu}{s}[/tex]

[tex]Z = \frac{13 - 8.7}{\frac{20.2}{\sqrt{40}}}[/tex]

[tex]Z = 1.35[/tex]

[tex]Z = 1.35[/tex] has a pvalue of 0.9115

1 - 0.9115 = 0.0885

0.0885 = 8.85% probability that the mean annual return on common stocks over the next 40 years will exceed 13%.

(b) What is the probability that the mean return will be less than 8%?

This is the pvalue of Z when X = 8. So

[tex]Z = \frac{X - \mu}{s}[/tex]

[tex]Z = \frac{8 - 8.7}{\frac{20.2}{\sqrt{40}}}[/tex]

[tex]Z = -0.22[/tex]

[tex]Z = -0.22[/tex] has a pvalue of 0.4129

0.4129 = 41.29% probability that the mean return will be less than 8%


Related Questions

Solve the equation.

3(x−9)=30

Answers

Answer:

x = 19

Step-by-step explanation:

3(x - 9) = 30

Divide both sides by 3 to isolate the binomial.

x - 9 = 10

Add 9 to both sides to isolate x.

x = 19

Check your answer by plugging x = 19 back into the equation.

3(x - 9) = 30

3(19 - 9) = 30

Subtract.

3(10) = 30

Multiply.

30 = 30

Your answer is correct.

Hope this helps!

Answer:

x = 19

Step-by-step explanation:

First, we must distribute 3(x-9) = 30

[tex]3x - 27 = 30[/tex]

Now, that we've distributed this equation, we can proceed.

Secondly, since there is a subtraction sign in front of 27, we must do the opposite, addition.

Add 27 to 27 and 30:

[tex]3x - 27 = 30[/tex]

[tex]-27 + 27 = 0[/tex]

[tex]30 + 27 = 57[/tex]

Furthermore, -27 + 27 is 0, so it cancels itself out. Also, since we added 30 and 27 and got 57, replace 30 with 57.

[tex]3x = 57[/tex]

Lastly, divide 57 by the number in front of coefficient, 3.

[tex]57/3=19[/tex]

Therefore, [tex]x=19.[/tex]

**TO MAKE THIS MORE UNDERSTANDING, THIS IS HOW YOUR EQUATION SHOULD LOOK WHILE SOLVING**

Find the missing fraction worksheet 5 1/2 + ? = 7

Answers

Answer:

1 1/2

Step-by-step explanation:

7-5 1/2 is 1 1/2 so 1 1/2+5 1/2 -7

A jar contains 6 blue gumballs, 4 yellow gumballs, and 8 red gumballs. What is the probability of choosing a yellow gumball and then a red gumball if the first gumball is placed back into the jar before the second is chosen?

Answers

Answer:

2/9 or 22.22% and 4/9 or 44.44%

Step-by-step explanation:

6+4+8=18   4/18=2/9   8/18=4/9

Approximate the solutions to this system. y=3x^2+x-6
y=x-4
Round your answer to the nearest hundredth.

Answers

Y=28%]+£~€|>^€:21739=+

What is 20 minus 2 equal?

Answers

Answer:

18

Step-by-step explanation:

20-2=18

please brainiest

its 18

------------------

bye! <3

Helppp can’t figure this one out

Answers

Answer:

x = 5.9

Step-by-step explanation:

Reference angle = 26°

Opposite = x

Adjacent = 12

Apply TO A:

Tan 26 = Opp/Adj

Substitute

Tan 26 = x/12

Multiply both sides by 12

12*Tan 26 = x

5.85279107 = x

x = 5.9 (nearest tenth)

Which of the following equations expresses the
relationship between x and y in the table below?

A y = 10x + 1
B. y = 2x - 1
C. y = -x + 45
D. y = -3x + 53
E. y = -7x + 81

Answers

Answer:

D

Step-by-step explanation:

ummm.....

A diver made 6 dives in 30 days. At this rate how many dives did the diver make in 50 days?

HELP IM GIVING BRAINLIEST!!!! :))

Answers

He makes 8 dives in 50 days

mr.jim would like to plant carrots all around base of the fence surrounding his square feet. the area of his garden is 100 sq feet. in feet what is tje perimeter​

Answers

if the shape is a square the perimeter is 40

Jason bought 3/4 of jelly beans for $12.60 how much would a pound cost Jason

Answers

$16.80 because $4.20 x 3 = $12.60 and $12.60 + $4.20 = $16.80

What is the mode of the quiz scores 2?3?4?5?

Answers

Answer:

2

Step-by-step explanation:

Frequency means the number of times the number appears.

2 appears the most since its frequency is the largest. 2 appeared 5 times.

Answer:

To find the mode, you have to find the number that appears the most.

Here, I see that 2 appears the most.

2 is the mode.

Step-by-step explanation:

There are a lot of lazy students.

I hope you are not one of them!

A cone has a radius of 7cm and a height of 12 cm. Find the volume

Answers

Answer:

615.75m cubed

Step-by-step explanation:

What is the following difference?
2ab(√/192ab²)-5[√/81a¹b³
O-3ab √3ab²
O 18ab² (2/3a)-45a2b² (2√3b)
0-7ab(2√3ab²)
O
8ab(√3ab²-15ab² (2√3ab)

Answers

Expressions with equal values are considered equivalent expressions. the difference is 2ab(√/192ab²)-5[√/81a¹b³ is -7ab(2√3ab²)

what are expressions ?

In mathematics, it is possible to multiply, divide, add, or remove. The construction of an expression is as follows: Expression, number, and mathematical operator Numbers, variables, and functions are the building blocks of a mathematical expression (such as addition, subtraction, multiplication or division etc.) Expressions and phrases can be contrasted.

given

Rewrite the above expression as:

[tex]2ab\sqrt[3]{3*4^{3} *ab^{2} } - 5\sqrt[3]{3*3^{3} * a^{4}b^{5} }[/tex]

Evaluate the cube roots

[tex]2ab {4\sqrt[3]{3ab^{2} } } - 5 {3ab\sqrt[3]{3ab^{2} }[/tex]

Evaluate the differences

-7ab(2√3ab²)

Expressions with equal values are considered equivalent expressions. the difference is 2ab(√/192ab²)-5[√/81a¹b³ is -7ab(2√3ab²)

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The total weight of 15 bags of groceries is 45 pounds. If each bag weighs the same amount, how much would 7 bags of groceries weigh?

Answers

If 15 bags weigh 45pounds. Then each bag weighs 3 pounds. 45 / 15 = 3

7 bags weigh 21 pounds. 7 x 3 = 21

Beverly Hobbs earns $683 a week she is single and claims 2 allowances what amount is withheld weekly for federal income tax

Answers

Therefore, $52.25 is the answer to the inquiry about what percentage of a person's income is withheld each week for federal income tax.

What is percentage?

A % is a number that indicates how many out of 100 it is, and it can also be expressed as a decimal or a fraction. Put the percentage value in the numerator and 100 in the denominator to convert a percentage to a fraction.

Here,

The Federal Insurance Contribution Act is the American legislative framework in use here, and it contains the criteria and guidelines that are utilized to determine payroll taxes on an employee's paychecks. The social security and Medicare programs are funded through taxation, which is paid by both employers and employees.

The amount of federal income tax deducted from the weekly cheque is:

6.2% from Social Security plus 1.45% from Medicare.

= 7.5 percent of the weekly gross salary.

The amount of federal income tax withheld each week from Beverly Hibbs's $683.00 weekly salary is:

= 0.0765 × 683

= $52.25

Therefore, $52.25 is the answer to the inquiry about what proportion of a person's income is withheld each week for federal income tax.

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identify the part of following expression 4x-2y + 6/ 2x

Coefficients:

Constants:

Variable Terms:

Like Terms:

Answers

identification of the expression 4x- 2y + 6 = 2x is

Coefficient: 4, -2, 2Constant: 6Variable term: 4x, -2yLike terms: 4x and 2x

What is an expression?

Mathematical expressions consist of at least two numbers or variables, at least one arithmetic operation, and a statement. It's possible to multiply, divide, add, or subtract with this mathematical operation.

Given, a linear expression 4x-2y + 6 = 2x

Coefficient:

Coefficients are the numbers by which the variables in an equation are multiplied

Thus, the Coefficient terms for this equation = 4x, -2y, 2x

Constants:

the constant is the part of the expression that does not vary with the value of x and y.

Thus, constant terms for this equation = 6

variable terms:

These are the terms that vary at the different values of x and y.

Thus, variable terms for this equation = 4x, -2y

Like terms:

Terms that have identical variable parts (same variable(s) and same exponent(s))

thus, Like terms for this expression = 4x, 2x

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100 POINTS TO WHOEVER ANSWERS CORRECT

if you could ask any 2 questions about a 5th degree polynomial function what would they be and why. HURRY

Answers

Answer:

Why is there no general symmetry?

Does it always take  six points or six pieces of information to describe a quintic function?

Why are the roots not solvable by radicals?

I really don't know the "why", I just steer away from them when I can.

in last weeks volleyball game Ashley served 15 times and made 2 errors. What was her serving percentage? (what percent did she serve it in?

Answers

1300%


hope this helps

Lena sells two types of fidget toys. The price for each fidget toy A is x and the price for each Fidget B is y. Write an equation that will let her earn a profit of $3500 if she sells 20 of Fidget A and 60 of Fidget B

Answers

Answer:

3500 = 20x + 60y

Step-by-step explanation:

Its just the answer

At a local shop Sissi spends one third of her money on milk and two fifths of her money on bread and a one ninth on a lolipop
(A) what fraction of Sissi's money did she spend in the local shop?
(B) what fraction of Sissi's money does she have left?​

Answers

Answer:

the answer for a is 38 over 45 that is the total fraction of her money that she spent in the local shop for b the answer is 7/45

This came about as for a when we added the total number of expenditures that CeCe had made that is 1/3 + 2/5 + 1/9 and that is 38/45 so that is the fraction of money that she said that she spent in the local shop.

as for b it said what fraction of sissies money does she have left and we know that the total fraction is 38 over 45 and we are going to subtract it from 1.

and that will give us 7/45

The sum of two numbers is 210 and their difference is 30. What are the two numbers?

Answers

Answer:

120 and 90

Step-by-step explanation:

let one number be x and the other y

x + y = 210 (sum = 210)

x - y = 30 (difference = 30)

add the two equations together

2x = 240

divide both sides by 2 to isolate x

x = 120

plug into 1st equation

120 + y = 210

subtract 120 from both sides

y = 90

Solution :

We take the 2 numbers as 'x' and 'x-30' in order to find those numbers

We plug the values into the given equation

[tex]x + x - 30 = 210\\2x - 30 = 210\\\\2x = 240\\x = \frac{240}{2} \\x = 120\\x - 30 = 120 - 30 = 90\\[/tex]

[tex]120 - 90 = 30[/tex]

Hence , the two numbers are 120 and 90

Which expression results in a rational number?

Answers

Answer:

3

Step-by-step explanation:

It equal .4, which is rational because it doesn't repeat.

Answer:

3

Step-by-step explanation:

Find the 27th term of a sequence where the first term is – 7
and the common difference is 7.

Answers

Answer:

175


Explanation:

1. an (any term) = 27
2. a1 (first term) = -7
3. d (common difference) = 7

• Use the explicit formula:

an = d(n - 1) + a1

a27 = 7(27 - 1) - 7


- Subtract inside the parenthesis ():

a27 = 7(26) - 7


- Distribute:

a27 = 182 - 7


- Subtract:

a27 = 175

Sara had 222 dollars to spend on 9 books after buying then she had 15 dollars how much did each book cost​

Answers

Answer:

Each book cost 222 - 15 = 207 / 9 = 22.88 dollars.

In a class of 30 students, 6 have a brother and 12 have a sister. There are 14 students
who do not have any siblings. What is the probability that a student chosen randomly
from the class has a brother and a sister?
HELPPPPPP

Answers

30 students

14 have no siblings

that leaves 16 with siblings

6 have brothers and 12 have sisters which = 18 so 2 of the students have both a brother and a sister

2/30 students have a brother and a sister

1/15 chance

Ques below: please answer that

Answers

The answer is 18 meters per second


990 divided by 55 equals 18

PLEASE HELP ITS DUE TOMORROW maths

Answers

Answer:

Average speed: 698 kmh^-1

Step-by-step explanation:

In 1440 earth days, there are 34560 hours (1440 × 24)

Solving for the average speed, km/h

[tex]\frac{24~130000km}{3450hr}[/tex] ≈ [tex]698.21 km[/tex]

so, the average speed is [tex]698 kmh^{-1}[/tex]

[tex]---------[/tex]

hope it helps..

have a great day!!

An ice cream store offers waffle cones or sugar cones. Each is equally likely to be chosen.

Which of the following models could be used to simulate this situation?



(HINT: Choose the model with the same number of possible outcomes as cone choices.)

Group of answer choices

A rolling a 6-sided number cube

B spinning a spinner with 3 equal sections

C flipping a coin

D using a random number generator that generates numbers 1 through 9

Answers

Answer:

C

Step-by-step explanation:

hopes it helps you!

Answer:

Flipping a coin

Step-by-step explanation:

It is the best answer, because the other choices do not represent a 50% chance. Rolling a 6-sided number cube would be good if you had 6 things, spinning a spinner would be ideal for 3, and using a number generator would be good for 9 things.

Match the parametric equations with the correct graph.
x=t cos (t), y=t, z=t sin(t), t ≥ 0

Answers

The given parametric equation represents the graph mentioned in Option A.

What is the parametric equation?

A parametric equation is defined as a kind of equation that inherit an independent variable called a parameter, and where dependent variables are defined as continuous functions of the parameter.

here,
For equation, x = t cos (t), y = t, z = t sin(t), t ≥ 0.
Since,

x² + y² = t²cos²(t) + t² sin²t
x² + y² = t²
x² + y² = z²

Here, the x-z cross-section of the curve is a circle. But as t accumulates, the radius of the circle also advances in the y direction, and those circular cross-sections extend as the value of the parameter t increase.
The curve will draft as circles in x-z planes while moving towards y direction and also the radius of those circular cross sections increases at the same rate as its advancement towards y direction.

Thus, the given parametric equation represents the graph mentioned in Option A.

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dave earns $200 per week plus 4.1 commission. He sold $5175.50 in the month of February. What is his gross monthly earinings for february?

Answers

The gross monthly earnings for February will be $1012.2

How to illustrate the expression?

It should be noted that gross monthly earnings simply means the earnings that an individual makes for a particular month.

In this case, Dave earns $200 per week plus 4.1 commission. He sold $5175.50 in the month of February. His gross monthly earnings for February will be:

= ($200 × 4) + (4.1% × $5175.50)

= $1012.2

Therefore, $1012.2 will be the earnings.

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