The probability of long-term bonds and t-bill Introduction: The probability distribution refers to a function that provides the possibilities (probabilities) of occurrence of various possible outcomes in an investment.

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Answer 1

Question

Features Features Normal distribution is characterized by two parameters, mean (µ) and standard deviation (σ). When graphed, the mean represents the center of the bell curve and the graph is perfectly symmetric about the center. The mean, median, and mode are all equal for a normal distribution. The standard deviation measures the data's spread from the center. The higher the standard deviation, the more the data is spread out and the flatter the bell curve looks. Variance is another commonly used measure of the spread of the distribution and is equal to the square of the standard deviation.

Chapter 10, Problem 28QP

a

Summary Introduction

To determine: The probability of long-term bonds and t-bill

Introduction:

The probability distribution refers to a function that provides the possibilities (probabilities) of occurrence of various possible outcomes in an investment.

a

Expert Solution

Explanation of Solution

Given information:

It is given that the return on long-term bonds and treasury-bills are normally distributed.

The formula of Z-score equation:

Z=X−μσ

Where,

Z refers to z-scores

X refers to return

µ refers to mean return

σ refers to standard deviation

When the return of long-term bonds is greater than 10%, the probability would be:

Z=X−μσ=10%−6.4%8.4%=0.4286

Considering, the Z value 0.4286 is approximately equal to 0.43.

Pr(R≥10%) = 1− Pr(R≤10%)

= 1− Pr(R≤10%)= 1−0.666=33.4

Hence, the probability if the return is greater than 10% is 33.4%.

When the return of long-term bonds is less than 0%, the probability would be:

Z=X−μσ=0%−6.4%8.4%=−0.7619

Considering, the Z value −0.7619 is approximately equal to −0.76 .

Z =Pr(R < 0%)=Pr(R >−0.76) =0.223

Hence, the probability if the return is less than 0% is 22.3%.

The probability is 33.4%, when the return on long-term corporate bonds is greater than 10%. The probability is 22.3%, when the return on long-term corporate bonds is less than 0%.

(b)

Summary Introduction

To determine: The probability of long-term bonds and t-bill

(b)

Expert Solution

Explanation of Solution

When the returns of t-bills are greater than 10%, then the probability would be:

Z=X−μσ=10%−3.5%3.1%=2.0968

Pr(R≥10%) = 1− Pr(R≤10%)= 1− Pr(R≤10%)= 1−0.9802=1.80%

Hence, the probability if the return on t-bills is greater than 10% is 1.80%.

When the returns of t-bills are less than 0%, then the probability would be:

Z=X−μσ=0%−3.5%3.1%=−1.129

Considering, the Z value −1.129 is approximately equal to −1.13 .

Z =Pr(R < 0%)=Pr(R >−1.13) =0.129

Hence, the probability if the return on t-bills is less than 0% is 12.9%.

The probability is 1.80%, when the return on t-bill is greater than 10%. The probability is 12.9%, when the return on long-term corporate bonds is less than 0%.

c)

Summary Introduction

To determine: The probability of long-term bonds and t-bill

c)

Expert Solution

Explanation of Solution

When the return of long-term bonds is less than -4.18%, then the probability would be:

Z=X−μσ=−4.18%−6.4%8.4%=−1.2595

Considering, the Z value −1.259 is approximately equal to −1.26 .

Z =Pr(R ≤ −4.18%)=Pr(R >−1.26) =0.1038

Hence, the probability if the return on t-bills are less than – 4.18% is 10.38%.

When the return of T-bills is greater than 10.56%, the probability would be:

Z =X−μσ=10.56%−3.6%3.1%=2.2774

Considering, the Z value 2.2774 is approximately equal to 2.28.

Pr(R≥10.56%) = 1− Pr(R≤10.56%)

= 1− Pr(R≤10.56%)= 1−0.9887=0.0113

Hence, the probability if the return on t-bills is greater than 10.56% is 1.13%. The probability is 10.38%, when the long-term bonds are less than -4.18. The probability is 1.13%, when the long-term bonds are greater than 10.56%.

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Students have asked these similar questions

Suppose the returns on long-term corporate bonds and T-bills are normally distributed. Assume for a certain time period, long-term corporate bonds had an average return of 6.5 percent and a standard deviation of 8.5 percent. For the same period, T-bills had an average return of 3.3 percent and a standard deviation of 3.1 percent. Use the NORMDIST function in Excel to answer the following questions: a. What is the probability that in any given year, the return on long-term corporate bonds will be greater than 10 percent? Less than 0 percent? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the probability that in any given year, the return on T-bills will be greater than 10 percent? Less than 0 percent? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. c. In 1979, the return on long-term corporate bonds was -4.18 percent. How…

which of the following past returns should mutual funds publish in their annual reports? A.Excess return B.Geometric average return C.Arithmetric average return D.Index return

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Answer 2

Question

Features Features Normal distribution is characterized by two parameters, mean (µ) and standard deviation (σ). When graphed, the mean represents the center of the bell curve and the graph is perfectly symmetric about the center. The mean, median, and mode are all equal for a normal distribution. The standard deviation measures the data's spread from the center. The higher the standard deviation, the more the data is spread out and the flatter the bell curve looks. Variance is another commonly used measure of the spread of the distribution and is equal to the square of the standard deviation.

Chapter 10, Problem 28QP

a

Summary Introduction

To determine: The probability of long-term bonds and t-bill

Introduction:

The probability distribution refers to a function that provides the possibilities (probabilities) of occurrence of various possible outcomes in an investment.

a

Expert Solution

Explanation of Solution

Given information:

It is given that the return on long-term bonds and treasury-bills are normally distributed.

The formula of Z-score equation:

Z=X−μσ

Where,

Z refers to z-scores

X refers to return

µ refers to mean return

σ refers to standard deviation

When the return of long-term bonds is greater than 10%, the probability would be:

Z=X−μσ=10%−6.4%8.4%=0.4286

Considering, the Z value 0.4286 is approximately equal to 0.43.

Pr(R≥10%) = 1− Pr(R≤10%)

= 1− Pr(R≤10%)= 1−0.666=33.4

Hence, the probability if the return is greater than 10% is 33.4%.

When the return of long-term bonds is less than 0%, the probability would be:

Z=X−μσ=0%−6.4%8.4%=−0.7619

Considering, the Z value −0.7619 is approximately equal to −0.76 .

Z =Pr(R < 0%)=Pr(R >−0.76) =0.223

Hence, the probability if the return is less than 0% is 22.3%.

The probability is 33.4%, when the return on long-term corporate bonds is greater than 10%. The probability is 22.3%, when the return on long-term corporate bonds is less than 0%.

(b)

Summary Introduction

To determine: The probability of long-term bonds and t-bill

(b)

Expert Solution

Explanation of Solution

When the returns of t-bills are greater than 10%, then the probability would be:

Z=X−μσ=10%−3.5%3.1%=2.0968

Pr(R≥10%) = 1− Pr(R≤10%)= 1− Pr(R≤10%)= 1−0.9802=1.80%

Hence, the probability if the return on t-bills is greater than 10% is 1.80%.

When the returns of t-bills are less than 0%, then the probability would be:

Z=X−μσ=0%−3.5%3.1%=−1.129

Considering, the Z value −1.129 is approximately equal to −1.13 .

Z =Pr(R < 0%)=Pr(R >−1.13) =0.129

Hence, the probability if the return on t-bills is less than 0% is 12.9%.

The probability is 1.80%, when the return on t-bill is greater than 10%. The probability is 12.9%, when the return on long-term corporate bonds is less than 0%.

c)

Summary Introduction

To determine: The probability of long-term bonds and t-bill

c)

Expert Solution

Explanation of Solution

When the return of long-term bonds is less than -4.18%, then the probability would be:

Z=X−μσ=−4.18%−6.4%8.4%=−1.2595

Considering, the Z value −1.259 is approximately equal to −1.26 .

Z =Pr(R ≤ −4.18%)=Pr(R >−1.26) =0.1038

Hence, the probability if the return on t-bills are less than – 4.18% is 10.38%.

When the return of T-bills is greater than 10.56%, the probability would be:

Z =X−μσ=10.56%−3.6%3.1%=2.2774

Considering, the Z value 2.2774 is approximately equal to 2.28.

Pr(R≥10.56%) = 1− Pr(R≤10.56%)

= 1− Pr(R≤10.56%)= 1−0.9887=0.0113

Hence, the probability if the return on t-bills is greater than 10.56% is 1.13%. The probability is 10.38%, when the long-term bonds are less than -4.18. The probability is 1.13%, when the long-term bonds are greater than 10.56%.

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Answer 3

Question

Features Features Normal distribution is characterized by two parameters, mean (µ) and standard deviation (σ). When graphed, the mean represents the center of the bell curve and the graph is perfectly symmetric about the center. The mean, median, and mode are all equal for a normal distribution. The standard deviation measures the data's spread from the center. The higher the standard deviation, the more the data is spread out and the flatter the bell curve looks. Variance is another commonly used measure of the spread of the distribution and is equal to the square of the standard deviation.

Chapter 10, Problem 28QP

a

Summary Introduction

To determine: The probability of long-term bonds and t-bill

Introduction:

The probability distribution refers to a function that provides the possibilities (probabilities) of occurrence of various possible outcomes in an investment.

a

Expert Solution

Explanation of Solution

Given information:

It is given that the return on long-term bonds and treasury-bills are normally distributed.

The formula of Z-score equation:

Z=X−μσ

Where,

Z refers to z-scores

X refers to return

µ refers to mean return

σ refers to standard deviation

When the return of long-term bonds is greater than 10%, the probability would be:

Z=X−μσ=10%−6.4%8.4%=0.4286

Considering, the Z value 0.4286 is approximately equal to 0.43.

Pr(R≥10%) = 1− Pr(R≤10%)

= 1− Pr(R≤10%)= 1−0.666=33.4

Hence, the probability if the return is greater than 10% is 33.4%.

When the return of long-term bonds is less than 0%, the probability would be:

Z=X−μσ=0%−6.4%8.4%=−0.7619

Considering, the Z value −0.7619 is approximately equal to −0.76 .

Z =Pr(R < 0%)=Pr(R >−0.76) =0.223

Hence, the probability if the return is less than 0% is 22.3%.

The probability is 33.4%, when the return on long-term corporate bonds is greater than 10%. The probability is 22.3%, when the return on long-term corporate bonds is less than 0%.

(b)

Summary Introduction

To determine: The probability of long-term bonds and t-bill

(b)

Expert Solution

Explanation of Solution

When the returns of t-bills are greater than 10%, then the probability would be:

Z=X−μσ=10%−3.5%3.1%=2.0968

Pr(R≥10%) = 1− Pr(R≤10%)= 1− Pr(R≤10%)= 1−0.9802=1.80%

Hence, the probability if the return on t-bills is greater than 10% is 1.80%.

When the returns of t-bills are less than 0%, then the probability would be:

Z=X−μσ=0%−3.5%3.1%=−1.129

Considering, the Z value −1.129 is approximately equal to −1.13 .

Z =Pr(R < 0%)=Pr(R >−1.13) =0.129

Hence, the probability if the return on t-bills is less than 0% is 12.9%.

The probability is 1.80%, when the return on t-bill is greater than 10%. The probability is 12.9%, when the return on long-term corporate bonds is less than 0%.

c)

Summary Introduction

To determine: The probability of long-term bonds and t-bill

c)

Expert Solution

Explanation of Solution

When the return of long-term bonds is less than -4.18%, then the probability would be:

Z=X−μσ=−4.18%−6.4%8.4%=−1.2595

Considering, the Z value −1.259 is approximately equal to −1.26 .

Z =Pr(R ≤ −4.18%)=Pr(R >−1.26) =0.1038

Hence, the probability if the return on t-bills are less than – 4.18% is 10.38%.

When the return of T-bills is greater than 10.56%, the probability would be:

Z =X−μσ=10.56%−3.6%3.1%=2.2774

Considering, the Z value 2.2774 is approximately equal to 2.28.

Pr(R≥10.56%) = 1− Pr(R≤10.56%)

= 1− Pr(R≤10.56%)= 1−0.9887=0.0113

Hence, the probability if the return on t-bills is greater than 10.56% is 1.13%. The probability is 10.38%, when the long-term bonds are less than -4.18. The probability is 1.13%, when the long-term bonds are greater than 10.56%.

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Answer 4

Question

Features Features Normal distribution is characterized by two parameters, mean (µ) and standard deviation (σ). When graphed, the mean represents the center of the bell curve and the graph is perfectly symmetric about the center. The mean, median, and mode are all equal for a normal distribution. The standard deviation measures the data's spread from the center. The higher the standard deviation, the more the data is spread out and the flatter the bell curve looks. Variance is another commonly used measure of the spread of the distribution and is equal to the square of the standard deviation.

Chapter 10, Problem 28QP

a

Summary Introduction

To determine: The probability of long-term bonds and t-bill

Introduction:

The probability distribution refers to a function that provides the possibilities (probabilities) of occurrence of various possible outcomes in an investment.

a

Expert Solution

Explanation of Solution

Given information:

It is given that the return on long-term bonds and treasury-bills are normally distributed.

The formula of Z-score equation:

Z=X−μσ

Where,

Z refers to z-scores

X refers to return

µ refers to mean return

σ refers to standard deviation

When the return of long-term bonds is greater than 10%, the probability would be:

Z=X−μσ=10%−6.4%8.4%=0.4286

Considering, the Z value 0.4286 is approximately equal to 0.43.

Pr(R≥10%) = 1− Pr(R≤10%)

= 1− Pr(R≤10%)= 1−0.666=33.4

Hence, the probability if the return is greater than 10% is 33.4%.

When the return of long-term bonds is less than 0%, the probability would be:

Z=X−μσ=0%−6.4%8.4%=−0.7619

Considering, the Z value −0.7619 is approximately equal to −0.76 .

Z =Pr(R < 0%)=Pr(R >−0.76) =0.223

Hence, the probability if the return is less than 0% is 22.3%.

The probability is 33.4%, when the return on long-term corporate bonds is greater than 10%. The probability is 22.3%, when the return on long-term corporate bonds is less than 0%.

(b)

Summary Introduction

To determine: The probability of long-term bonds and t-bill

(b)

Expert Solution

Explanation of Solution

When the returns of t-bills are greater than 10%, then the probability would be:

Z=X−μσ=10%−3.5%3.1%=2.0968

Pr(R≥10%) = 1− Pr(R≤10%)= 1− Pr(R≤10%)= 1−0.9802=1.80%

Hence, the probability if the return on t-bills is greater than 10% is 1.80%.

When the returns of t-bills are less than 0%, then the probability would be:

Z=X−μσ=0%−3.5%3.1%=−1.129

Considering, the Z value −1.129 is approximately equal to −1.13 .

Z =Pr(R < 0%)=Pr(R >−1.13) =0.129

Hence, the probability if the return on t-bills is less than 0% is 12.9%.

The probability is 1.80%, when the return on t-bill is greater than 10%. The probability is 12.9%, when the return on long-term corporate bonds is less than 0%.

c)

Summary Introduction

To determine: The probability of long-term bonds and t-bill

c)

Expert Solution

Explanation of Solution

When the return of long-term bonds is less than -4.18%, then the probability would be:

Z=X−μσ=−4.18%−6.4%8.4%=−1.2595

Considering, the Z value −1.259 is approximately equal to −1.26 .

Z =Pr(R ≤ −4.18%)=Pr(R >−1.26) =0.1038

Hence, the probability if the return on t-bills are less than – 4.18% is 10.38%.

When the return of T-bills is greater than 10.56%, the probability would be:

Z =X−μσ=10.56%−3.6%3.1%=2.2774

Considering, the Z value 2.2774 is approximately equal to 2.28.

Pr(R≥10.56%) = 1− Pr(R≤10.56%)

= 1− Pr(R≤10.56%)= 1−0.9887=0.0113

Hence, the probability if the return on t-bills is greater than 10.56% is 1.13%. The probability is 10.38%, when the long-term bonds are less than -4.18. The probability is 1.13%, when the long-term bonds are greater than 10.56%.

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Answer 5

Chapter 10, Problem 28QP

a

Summary Introduction

To determine: The probability of long-term bonds and t-bill

Introduction:

The probability distribution refers to a function that provides the possibilities (probabilities) of occurrence of various possible outcomes in an investment.

a

Expert Solution

Explanation of Solution

Given information:

It is given that the return on long-term bonds and treasury-bills are normally distributed.

The formula of Z-score equation:

Z=X−μσ

Where,

Z refers to z-scores

X refers to return

µ refers to mean return

σ refers to standard deviation

When the return of long-term bonds is greater than 10%, the probability would be:

Z=X−μσ=10%−6.4%8.4%=0.4286

Considering, the Z value 0.4286 is approximately equal to 0.43.

Pr(R≥10%) = 1− Pr(R≤10%)

= 1− Pr(R≤10%)= 1−0.666=33.4

Hence, the probability if the return is greater than 10% is 33.4%.

When the return of long-term bonds is less than 0%, the probability would be:

Z=X−μσ=0%−6.4%8.4%=−0.7619

Considering, the Z value −0.7619 is approximately equal to −0.76 .

Z =Pr(R < 0%)=Pr(R >−0.76) =0.223

Hence, the probability if the return is less than 0% is 22.3%.

The probability is 33.4%, when the return on long-term corporate bonds is greater than 10%. The probability is 22.3%, when the return on long-term corporate bonds is less than 0%.

(b)

Summary Introduction

To determine: The probability of long-term bonds and t-bill

(b)

Expert Solution

Explanation of Solution

When the returns of t-bills are greater than 10%, then the probability would be:

Z=X−μσ=10%−3.5%3.1%=2.0968

Pr(R≥10%) = 1− Pr(R≤10%)= 1− Pr(R≤10%)= 1−0.9802=1.80%

Hence, the probability if the return on t-bills is greater than 10% is 1.80%.

When the returns of t-bills are less than 0%, then the probability would be:

Z=X−μσ=0%−3.5%3.1%=−1.129

Considering, the Z value −1.129 is approximately equal to −1.13 .

Z =Pr(R < 0%)=Pr(R >−1.13) =0.129

Hence, the probability if the return on t-bills is less than 0% is 12.9%.

The probability is 1.80%, when the return on t-bill is greater than 10%. The probability is 12.9%, when the return on long-term corporate bonds is less than 0%.

c)

Summary Introduction

To determine: The probability of long-term bonds and t-bill

c)

Expert Solution

Explanation of Solution

When the return of long-term bonds is less than -4.18%, then the probability would be:

Z=X−μσ=−4.18%−6.4%8.4%=−1.2595

Considering, the Z value −1.259 is approximately equal to −1.26 .

Z =Pr(R ≤ −4.18%)=Pr(R >−1.26) =0.1038

Hence, the probability if the return on t-bills are less than – 4.18% is 10.38%.

When the return of T-bills is greater than 10.56%, the probability would be:

Z =X−μσ=10.56%−3.6%3.1%=2.2774

Considering, the Z value 2.2774 is approximately equal to 2.28.

Pr(R≥10.56%) = 1− Pr(R≤10.56%)

= 1− Pr(R≤10.56%)= 1−0.9887=0.0113

Hence, the probability if the return on t-bills is greater than 10.56% is 1.13%. The probability is 10.38%, when the long-term bonds are less than -4.18. The probability is 1.13%, when the long-term bonds are greater than 10.56%.

Answer 6

Chapter 10, Problem 28QP

a

Summary Introduction

To determine: The probability of long-term bonds and t-bill

Introduction:

The probability distribution refers to a function that provides the possibilities (probabilities) of occurrence of various possible outcomes in an investment.

a

Expert Solution

Explanation of Solution

Given information:

It is given that the return on long-term bonds and treasury-bills are normally distributed.

The formula of Z-score equation:

Z=X−μσ

Where,

Z refers to z-scores

X refers to return

µ refers to mean return

σ refers to standard deviation

When the return of long-term bonds is greater than 10%, the probability would be:

Z=X−μσ=10%−6.4%8.4%=0.4286

Considering, the Z value 0.4286 is approximately equal to 0.43.

Pr(R≥10%) = 1− Pr(R≤10%)

= 1− Pr(R≤10%)= 1−0.666=33.4

Hence, the probability if the return is greater than 10% is 33.4%.

When the return of long-term bonds is less than 0%, the probability would be:

Z=X−μσ=0%−6.4%8.4%=−0.7619

Considering, the Z value −0.7619 is approximately equal to −0.76 .

Z =Pr(R < 0%)=Pr(R >−0.76) =0.223

Hence, the probability if the return is less than 0% is 22.3%.

The probability is 33.4%, when the return on long-term corporate bonds is greater than 10%. The probability is 22.3%, when the return on long-term corporate bonds is less than 0%.

Answer 7

Chapter 10, Problem 28QP

a

Summary Introduction

To determine: The probability of long-term bonds and t-bill

Introduction:

The probability distribution refers to a function that provides the possibilities (probabilities) of occurrence of various possible outcomes in an investment.

Answer 8

a

Expert Solution

Explanation of Solution

Given information:

It is given that the return on long-term bonds and treasury-bills are normally distributed.

The formula of Z-score equation:

Z=X−μσ

Where,

Z refers to z-scores

X refers to return

µ refers to mean return

σ refers to standard deviation

When the return of long-term bonds is greater than 10%, the probability would be:

Z=X−μσ=10%−6.4%8.4%=0.4286

Considering, the Z value 0.4286 is approximately equal to 0.43.

Pr(R≥10%) = 1− Pr(R≤10%)

= 1− Pr(R≤10%)= 1−0.666=33.4

Hence, the probability if the return is greater than 10% is 33.4%.

When the return of long-term bonds is less than 0%, the probability would be:

Z=X−μσ=0%−6.4%8.4%=−0.7619

Considering, the Z value −0.7619 is approximately equal to −0.76 .

Z =Pr(R < 0%)=Pr(R >−0.76) =0.223

Hence, the probability if the return is less than 0% is 22.3%.

The probability is 33.4%, when the return on long-term corporate bonds is greater than 10%. The probability is 22.3%, when the return on long-term corporate bonds is less than 0%.

Answer 9

a

Expert Solution

Answer 10

a

Expert Solution

Answer 11

Expert Solution

Answer 12

(b)

Summary Introduction

To determine: The probability of long-term bonds and t-bill

(b)

Expert Solution

Explanation of Solution

When the returns of t-bills are greater than 10%, then the probability would be:

Z=X−μσ=10%−3.5%3.1%=2.0968

Pr(R≥10%) = 1− Pr(R≤10%)= 1− Pr(R≤10%)= 1−0.9802=1.80%

Hence, the probability if the return on t-bills is greater than 10% is 1.80%.

When the returns of t-bills are less than 0%, then the probability would be:

Z=X−μσ=0%−3.5%3.1%=−1.129

Considering, the Z value −1.129 is approximately equal to −1.13 .

Z =Pr(R < 0%)=Pr(R >−1.13) =0.129

Hence, the probability if the return on t-bills is less than 0% is 12.9%.

The probability is 1.80%, when the return on t-bill is greater than 10%. The probability is 12.9%, when the return on long-term corporate bonds is less than 0%.

Answer 13

(b)

Summary Introduction

To determine: The probability of long-term bonds and t-bill

Answer 14

(b)

Expert Solution

Explanation of Solution

When the returns of t-bills are greater than 10%, then the probability would be:

Z=X−μσ=10%−3.5%3.1%=2.0968

Pr(R≥10%) = 1− Pr(R≤10%)= 1− Pr(R≤10%)= 1−0.9802=1.80%

Hence, the probability if the return on t-bills is greater than 10% is 1.80%.

When the returns of t-bills are less than 0%, then the probability would be:

Z=X−μσ=0%−3.5%3.1%=−1.129

Considering, the Z value −1.129 is approximately equal to −1.13 .

Z =Pr(R < 0%)=Pr(R >−1.13) =0.129

Hence, the probability if the return on t-bills is less than 0% is 12.9%.

The probability is 1.80%, when the return on t-bill is greater than 10%. The probability is 12.9%, when the return on long-term corporate bonds is less than 0%.

Answer 15

(b)

Expert Solution

Answer 16

(b)

Expert Solution

Answer 17

Expert Solution

Answer 18

c)

Summary Introduction

To determine: The probability of long-term bonds and t-bill

c)

Expert Solution

Explanation of Solution

When the return of long-term bonds is less than -4.18%, then the probability would be:

Z=X−μσ=−4.18%−6.4%8.4%=−1.2595

Considering, the Z value −1.259 is approximately equal to −1.26 .

Z =Pr(R ≤ −4.18%)=Pr(R >−1.26) =0.1038

Hence, the probability if the return on t-bills are less than – 4.18% is 10.38%.

When the return of T-bills is greater than 10.56%, the probability would be:

Z =X−μσ=10.56%−3.6%3.1%=2.2774

Considering, the Z value 2.2774 is approximately equal to 2.28.

Pr(R≥10.56%) = 1− Pr(R≤10.56%)

= 1− Pr(R≤10.56%)= 1−0.9887=0.0113

Hence, the probability if the return on t-bills is greater than 10.56% is 1.13%. The probability is 10.38%, when the long-term bonds are less than -4.18. The probability is 1.13%, when the long-term bonds are greater than 10.56%.

Answer 19

c)

Summary Introduction

To determine: The probability of long-term bonds and t-bill

Answer 20

c)

Expert Solution

Explanation of Solution

When the return of long-term bonds is less than -4.18%, then the probability would be:

Z=X−μσ=−4.18%−6.4%8.4%=−1.2595

Considering, the Z value −1.259 is approximately equal to −1.26 .

Z =Pr(R ≤ −4.18%)=Pr(R >−1.26) =0.1038

Hence, the probability if the return on t-bills are less than – 4.18% is 10.38%.

When the return of T-bills is greater than 10.56%, the probability would be:

Z =X−μσ=10.56%−3.6%3.1%=2.2774

Considering, the Z value 2.2774 is approximately equal to 2.28.

Pr(R≥10.56%) = 1− Pr(R≤10.56%)

= 1− Pr(R≤10.56%)= 1−0.9887=0.0113

Hence, the probability if the return on t-bills is greater than 10.56% is 1.13%. The probability is 10.38%, when the long-term bonds are less than -4.18. The probability is 1.13%, when the long-term bonds are greater than 10.56%.

Answer 21

c)

Expert Solution

Answer 22

c)

Expert Solution

Answer 23

Expert Solution

Answer 24

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The probability of long-term bonds and t-bill Introduction: The probability distribution refers to a function that provides the possibilities (probabilities) of occurrence of various possible outcomes in an investment.

Solution Summary: The author explains that the probability distribution refers to a function that provides the possibilities of occurrence of various possible outcomes in an investment.

To determine: The probability of long-term bonds and t-bill

Introduction:

The probability distribution refers to a function that provides the possibilities (probabilities) of occurrence of various possible outcomes in an investment.

Explanation of Solution

To determine: The probability of long-term bonds and t-bill

Explanation of Solution

To determine: The probability of long-term bonds and t-bill

Explanation of Solution

Want to see more full solutions like this?

Chapter 10 Solutions

The probability of long-term bonds and t-bill Introduction: The probability distribution refers to a function that provides the possibilities (probabilities) of occurrence of various possible outcomes in an investment.

Solution Summary: The author explains that the probability distribution refers to a function that provides the possibilities of occurrence of various possible outcomes in an investment.

To determine: The probability of long-term bonds and t-bill Introduction: The probability distribution refers to a function that provides the possibilities (probabilities) of occurrence of various possible outcomes in an investment.

Explanation of Solution

To determine: The probability of long-term bonds and t-bill

Explanation of Solution

To determine: The probability of long-term bonds and t-bill

Explanation of Solution

Want to see more full solutions like this?

Chapter 10 Solutions

To determine: The probability of long-term bonds and t-bill

Introduction:

The probability distribution refers to a function that provides the possibilities (probabilities) of occurrence of various possible outcomes in an investment.