Assume the returns from holding small-company stocks are normally distributed. A

Question

Assume the returns from holding small-company stocks are normally distributed. Also assume the average annual return for holding the small-company stocks for a period of time was 17.1 percent and the standard deviation of those stocks for the period was 35 percent. Use the NORMDIST function in Excel® to answer the following questions. What is the approximate probability that your money will double in value in a single year? (Do not round intermediate calculations and enter your answer as a percent rounded to 3 decimal places, e.g., 32.161.) Probability % What is the approximate probability that your money will triple in value in a single year? (Do not round intermediate calculations and enter your answer as a percent rounded to 8 decimal places, e.g., 32.16161616.) Probability %

Explanation / Answer

In excel

NORM.DIST(x = 1, mean = 0.171, std_dev = 0.35, 0) = 6.896% for 100% returns

for 200% returns,

NORM.DIST(x = 2, mean = 0.171, std_dev = 0.35, 0) = 0.00013396%

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