SCENARIO 6-5 According to Investment Digest, the Arithmetic Mean of the Annual

question 23

Short Answer

SCENARIO 6-5
According to Investment Digest, the arithmetic mean of the annual return for common stocks over an
85-year period 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 Scenario 6-5, find the probability that the annual return of a random year will be
less than 11.5%.

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Definitions:

Competency

It refers to the ability or skill to perform a task successfully or efficiently.

Positive Reinforcement

The addition of a rewarding stimulus following a desired behavior, encouraging its future occurrence.

Negative Reinforcement

A process in behavioral psychology where the removal of an undesirable outcome or stimulus increases the likelihood of a behavior being repeated.

Punishment

The imposition of a penalty as retribution for an offense, with the aim of correcting behavior or serving as a deterrent.