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April 16, 2014

Homework Help: Finance

Posted by Anonymous on Sunday, July 15, 2012 at 6:03pm.

Assuming that the returns from holding small-company stocks are normally distributed, what is the approximate probability that your money will double in value in a single year? What about triple in value.

Many of my classmates have an expected return of 17.6% and a standard deviation of 34.8. Then they have the formula Prob(d>(200-17.6)/34.8 = prob. d>2.37
1-d>2.37=1-.991 = .009 chance of doubling.

I just need this problem explained to me. I'm not sure where all the numbers and information are coming from. Any help would be greatly appreciated.

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