Concept Questions

12.4a In words, how do we calculate a variance? A standard deviation?

12.4b With a normal distribution, what is the probability of ending up more than one standard deviation below the average?

12.4c Assuming that long-term corporate bonds have an approximately normal distribution, what is the approximate probability of earning 14.7 percent or more in a given year? With T-bills, roughly what is this probability?

12.4d What is the second lesson from capital market history?

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