Problem:
Suppose the average return on Asset A is 6.9 percent and the standard deviation is 8.9 percent and the average return and standard deviation on Asset B are 3.2 percent and 2.8 percent, respectively. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel® to answer the following questions.
Required:
Question 1: What is the probability that in any given year, the return on Asset A will be greater than 9 percent? Less than 0 percent?
Question 2: What is the probability that in any given year, the return on Asset B will be greater than 9 percent? Less than 0 percent?
Note: Show supporting computations in good form.