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

question 67

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 7.5%.

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Definitions:

Granite

A coarse-grained igneous rock composed mainly of quartz, feldspar, and mica, usually found in the continental crust.

Mesa

A flat-topped, steep-sided landform that rises sharply above the surrounding landscape, typical in arid and semi-arid regions.

Mantle Upwelling

The process where hotter and more buoyant material rises towards the Earth's surface from the mantle, often affecting tectonic activity.

Continental Rift

A continental rift is a linear zone where the Earth's crust and lithosphere are being pulled apart, often leading to the formation of a new ocean basin.