The major stock market indexes had strong results in 2018. The
mean one-year return for stocks in the S&P 500, a group of 500
very large companies, was -6.24% The mean one-year return for the
NASDAQ, a group of 3,200 small and medium-sized companies, was
-3.88% Historically, the one-year returns are approximately
normally distributed, the standard deviation in the S&P 500 is
approximately 20%, and the standard deviation in the NASDAQ is
approximately 30%.
a. What is the probability that a stock in the S&P 500
gained value in 2018?
b. What is the probability that a stock in the S&P 500
gained 10% or more in 2018?
c. What is the probability that a stock in the S&P 500 lost
20% or more in 2018?
d. What is the probability that a stock in the S&P 500 lost
30% or more in 2018?
e. Repeat (a) through (d) for a stock in the NASDAQ.
f. Write a short summary on your findings. Be sure to include a
discussion of the risks associated with a large standard
deviation.
The major stock market indexes had strong results in 2018. The mean one-year return for stocks in the S&P 500, a group o
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