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Get Full Access to Statistics: Informed Decisions Using Data - 5 Edition - Chapter 8.1 - Problem 23
Get Full Access to Statistics: Informed Decisions Using Data - 5 Edition - Chapter 8.1 - Problem 23

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?Rates of Return in Stocks The S&P 500 is a collection of 500 stocks of publicly traded companies. Using data obtained from Yahoo! Finance, the monthly

ISBN: 9780134133539 240

Solution for problem 23 Chapter 8.1

Statistics: Informed Decisions Using Data | 5th Edition

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Problem 23

Rates of Return in Stocks The S&P 500 is a collection of 500 stocks of publicly traded companies. Using data obtained from Yahoo! Finance, the monthly rates of return of the S&P 500 since 1950 are normally distributed. The mean rate of return is 0.007233 (0.7233%), and the standard deviation for rate of return is 0.04135 (4.135%).

(a) What is the probability that a randomly selected month has a positive rate of return? That is, what is P(x > 0)?

(b) Treating the next 12 months as a simple random sample, what is the probability that the mean monthly rate of return will be positive? That is, with n = 12, what is P( > 0)?

(c) Treating the next 24 months as a simple random sample, what is the probability that the mean monthly rate of return will be positive?

(d) Treating the next 36 months as a simple random sample, what is the probability that the mean monthly rate of return will be positive?

(e) Use the results of parts (b)–(d) to describe the likelihood of earning a positive rate of return on stocks as the investment time horizon increases.

Step-by-Step Solution:

Step 1 of 5) Rates of Return in Stocks The S&P 500 is a collection of 500 stocks of publicly traded companies. Using data obtained from Yahoo! Finance, the monthly rates of return of the S&P 500 since 1950 are normally distributed. The mean rate of return is 0.007233 (0.7233%), and the standard deviation for rate of return is 0.04135 (4.135%). (a) What is the probability that a randomly selected month has a positive rate of return That is, what is P(x > 0) (b) Treating the next 12 months as a simple random sample, what is the probability that the mean monthly rate of return will be positive That is, with n = 12, what is P( > 0) (c) Treating the next 24 months as a simple random sample, what is the probability that the mean monthly rate of return will be positive (d) Treating the next 36 months as a simple random sample, what is the probability that the mean monthly rate of return will be positive (e) Use the results of parts (b)–(d) to describe the likelihood of earning a positive rate of return on stocks as the investment time horizon increases.

Step 2 of 2

ISBN: 9780134133539

Statistics: Informed Decisions Using Data was written by and is associated to the ISBN: 9780134133539. This full solution covers the following key subjects: . This expansive textbook survival guide covers 88 chapters, and 2422 solutions. The answer to “?Rates of Return in Stocks The S&P 500 is a collection of 500 stocks of publicly traded companies. Using data obtained from Yahoo! Finance, the monthly rates of return of the S&P 500 since 1950 are normally distributed. The mean rate of return is 0.007233 (0.7233%), and the standard deviation for rate of return is 0.04135 (4.135%).(a) What is the probability that a randomly selected month has a positive rate of return? That is, what is P(x > 0)?(b) Treating the next 12 months as a simple random sample, what is the probability that the mean monthly rate of return will be positive? That is, with n = 12, what is P( > 0)?(c) Treating the next 24 months as a simple random sample, what is the probability that the mean monthly rate of return will be positive?(d) Treating the next 36 months as a simple random sample, what is the probability that the mean monthly rate of return will be positive?(e) Use the results of parts (b)–(d) to describe the likelihood of earning a positive rate of return on stocks as the investment time horizon increases.” is broken down into a number of easy to follow steps, and 187 words. Since the solution to 23 from 8.1 chapter was answered, more than 221 students have viewed the full step-by-step answer. The full step-by-step solution to problem: 23 from chapter: 8.1 was answered by , our top Statistics solution expert on 01/15/18, 03:19PM. This textbook survival guide was created for the textbook: Statistics: Informed Decisions Using Data, edition: 5.

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