TABLE 6-4 According to Investment Digest, the Arithmetic Mean of the Annual

question 118

Short Answer

TABLE 6-4
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 6-4, find the two values that will bound the middle 50% of the annual returns.

---

Definitions:

Long-Run Cost Curve

A graphical representation that shows the minimum cost at which different quantities of output can be produced in the long run, highlighting economies and diseconomies of scale.

Industry Supply Curve

A graphical representation showing the relationship between the price of a good and the total output supplied by all firms in the industry.

Production Function

A mathematical model that describes the relationship between the quantities of productive inputs used and the amount of output produced.

Competitive Industry

A market scenario where multiple firms produce similar products, leading to high levels of competition.