The Probability Distribution for the Rate of Return on an Investment

question 33

Short Answer

The probability distribution for the rate of return on an investment is

a.What is the probability that the rate of return will be at least 10%?
b.What is the expected rate of return?
c.What is the variance of the rate of return?

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Definitions:

Variance

A statistical measure that indicates the dispersion or spread of a set of data points or a probability distribution from its mean or expected value.

Squared Deviations

The squared differences between each data point and the mean, used in statistical analysis to measure variance.

Standard Deviation

A measure of the dispersion or spread of a set of data points relative to its mean, used in statistics to quantify variability.

Efficient Market

A market theory suggesting that asset prices fully reflect all available information, making it impossible to consistently achieve higher returns.