Suppose the returns on long-term corporate bonds and T-bills are normally distributed. Assume for a certain time period, long-term corporate bonds had an average return of 6.5 percent and a standard deviation of 8.5 percent. For the same period, T-bills had an average return of 3.3 percent and a standard deviation of 3.1 percent. Use the NORMDIST function in Excel® to answer the following questions: a. What is the probability that in any given year, the return on long-term corporate bonds will be greater than 10 percent? Less than 0 percent? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the probability that in any given year, the return on T-bills will be greater than 10 percent? Less than 0 percent? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. c. In 1979, the return on long-term corporate bonds was -4.18 percent. How likely is it that such a low return will recur at some point in the future? T-bills had a return of 10.38 percent in this same year. How likely is it that such a high return on T-bills will recur at some point in the future? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. a. Probability of return greater than 10 percent Probability of return less than 0 percent b. Probability of return greater than 10 percent Probability of return less than 0 percent c. Probability of return less than -4.18 percent Probability of greater than 10.38 percent % % % % % %
Suppose the returns on long-term corporate bonds and T-bills are normally distributed. Assume for a certain time period, long-term corporate bonds had an average return of 6.5 percent and a standard deviation of 8.5 percent. For the same period, T-bills had an average return of 3.3 percent and a standard deviation of 3.1 percent. Use the NORMDIST function in Excel® to answer the following questions: a. What is the probability that in any given year, the return on long-term corporate bonds will be greater than 10 percent? Less than 0 percent? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the probability that in any given year, the return on T-bills will be greater than 10 percent? Less than 0 percent? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. c. In 1979, the return on long-term corporate bonds was -4.18 percent. How likely is it that such a low return will recur at some point in the future? T-bills had a return of 10.38 percent in this same year. How likely is it that such a high return on T-bills will recur at some point in the future? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. a. Probability of return greater than 10 percent Probability of return less than 0 percent b. Probability of return greater than 10 percent Probability of return less than 0 percent c. Probability of return less than -4.18 percent Probability of greater than 10.38 percent % % % % % %
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 20P
Related questions
Question
100%
Transcribed Image Text:Suppose the returns on long-term corporate bonds and T-bills are normally distributed. Assume for a certain time period,
long-term corporate bonds had an average return of 6.5 percent and a standard deviation of 8.5 percent. For the same
period, T-bills had an average return of 3.3 percent and a standard deviation of 3.1 percent. Use the NORMDIST function in
Excel to answer the following questions:
a. What is the probability that in any given year, the return on long-term corporate bonds will be greater than 10
percent? Less than 0 percent?
Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places,
e.g., 32.16.
b. What is the probability that in any given year, the return on T-bills will be greater than 10 percent? Less than 0
percent?
Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places,
e.g., 32.16.
c. In 1979, the return on long-term corporate bonds was -4.18 percent. How likely is it that such a low return will recur at
some point in the future? T-bills had a return of 10.38 percent in this same year. How likely is it that such a high return
on T-bills will recur at some point in the future?
Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places,
e.g., 32.16.
a. Probability of return greater than 10 percent
Probability of return less than 0 percent
b. Probability of return greater than 10 percent
Probability of return less than 0 percent
c. Probability of return less than -4.18 percent
Probability of greater than 10.38 percent
%
%
%
%
%
%
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning