Stats/Econ Homework Help.

Economics Economics Questions
1

An investment portfolio contains stocks of a large number of corporations. Over the last year, the rates of return on these corporate stocks followed a normal distribution with population mean 14.5% and population standard deviation 8.4%.

(a) What is the probability that the rate of return was higher than 20%?

(b) What is the probability that the rate of return was negative?

(c) What is the probability that the rate of return was between 10% and 20%?

For the first, I used subtracting the population mean from .20 and divided buy population standard deviation then found the probability. Subtracted 1 from that as it is asking for probability beyond the curve. Second, i just used zero in the same equation as it asks for everything before 0. Third, probability of .20 minus probability of .10. Any reinforcement?

2

Sometimes I wish I taught economics, sometimes I am glad I don’t. Seeing a question like that makes me glad I don’t.

3

X Distribution = Normal

μ = .145

σ2 = .084

Z20 = .20 - .145/.084 = .6547 = Z Score of .65

P (x > .20)

= P (z > .65)

= 1 - P ( z < .65)

= 1 - .7422

= .2578 or probabilty that rate of return on the investment portfolio is higher than 20% is 26% or w/e your teacher wants you to round to.

I think I got that right, but stats is not my forte.

Make sure you have a table of areas of a standard normal distribution handy. I am far too lazy to do B and C.