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 6.4% and a standard deviation of 8.4%. For the same period, T-bills had an average return of 3.6% and a standard deviation of 3.1%.
(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?
(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?
(c) In 1979, the return on long-term corporate bonds was â4.18 percent. How likely is it that such a low return will recur at some point in the future? T-bills had a return of 10.56 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?
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 6.4% and a standard deviation of 8.4%. For the same period, T-bills had an average return of 3.6% and a standard deviation of 3.1%.
(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?
(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?
(c) In 1979, the return on long-term corporate bonds was â4.18 percent. How likely is it that such a low return will recur at some point in the future? T-bills had a return of 10.56 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?
Related questions
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 6.4% and a standard deviation of 9.7%. For the same period, T-bills had an average return of 4.9% and a standard deviation of 3.9%. 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? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
| Probability of return greater than 10 percent | ________% |
| Probability of return less than 0 percent | _________% |
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? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
| Probability of T-bill return greater than 10 percent | ____% |
| Probability of T-bill return less than 0 percent | _____% |
c. In one year, the return on long-term corporate bonds was â5.1 percent. How likely is it that such a low return will recur at some point in the future? T-bills had a return of 11.22 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? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
| Probability of return on long-term corporate bonds less than â5.1 percent | ___% |
| Probability of T-bill return greater than 11.22 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% and a standard deviation of 9.3%. For the same period, T-bills had an average return of 5% and a standard deviation of 3.5%. 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? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
| Probability of return greater than 10 percent | % |
| Probability of return less than 0 percent | % |
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? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
| Probability of T-bill return greater than 10 percent | % |
| Probability of T-bill return less than 0 percent | % |
c. In one year, the return on long-term corporate bonds was â5.4 percent. How likely is it that such a low return will recur at some point in the future? T-bills had a return of 11.32 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? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
| Probability of return on long-term corporate bonds less than â5.4 percent | % |
| Probability of T-bill return greater than 11.32 percent | % |
