TABLE 6-6 According to Investment Digest, the Arithmetic Mean of the Annual

question 97

Short Answer

TABLE 6-6
According to Investment Digest, the arithmetic mean of the annual return for common stocks from 1926-2010 was 9.5% but the value of the variance was not mentioned. Also 25% of the annual returns were below 8% while 65% of the annual returns were between 8% and 11.5%. The article claimed that the distribution of annual return for common stocks was bell-shaped and approximately symmetric. Assume that this distribution is normal with the mean given above. Answer the following questions without the help of a calculator, statistical software or statistical table.
-Referring to Table 6-6, find the probability that the annual return of a random year will be less than 11.5%.

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Definitions:

Availability Heuristic

A cognitive shortcut based on the first examples that spring to mind for someone when assessing a particular subject, idea, approach, or choice.

Mood-Congruent Memory

The propensity to recall memories that are consistent with one's current mood, influencing and reinforcing the emotional state.

Lack of Effort

The absence or minimal exertion of physical or mental energy towards accomplishing tasks or goals.

Lack of Ability

The absence or insufficiency of skill or power to perform tasks or actions.