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

question 183

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, 10% of the annual returns will be less than what amount?

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Definitions:

Federal Income Tax

Federal income tax is a tax levied by the IRS on the annual earnings of individuals, corporations, trusts, and other legal entities.

Wage Bracket Table

A chart used in the calculation of payroll taxes, indicating the amount of tax to be withheld based on the employee's earnings and tax status.

Excess Social Security Tax

The amount by which Social Security taxes withheld exceed the maximum limit set for the year.

Lookback Period

The lookback period is a specified duration during which past financial activities are reviewed for legal, tax, or regulatory purposes.