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

question 159

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 two values that will bound the middle 50% of the annual returns?

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Definitions:

Cumulative Preferred Stock

A type of preferred stock where dividends accumulate if not paid in a given year, requiring payment of missed dividends before common shareholders can receive dividends.

Common Stock

Equity securities that represent ownership in a company, usually accompanied by voting rights and potential for dividends.

Dividends

Money distributed from a company's profits to its owners or investors.

Stock Dividend

A dividend payment made in the form of additional shares rather than cash, often used by companies to conserve cash.