Suppose the returns on long-term government bonds are normally distributed. Assume long-term government bonds have a mean return of 6.0 percent and a standard deviation of 9.9 percent. a. What is the approximate probability that your return on these bonds will be less than - 3.9 percent in a given year?

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Mathematics

Payten Barr

26 June, 20:34

Suppose the returns on long-term government bonds are normally distributed. Assume long-term government bonds have a mean return of 6.0 percent and a standard deviation of 9.9 percent. a. What is the approximate probability that your return on these bonds will be less than - 3.9 percent in a given year?

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Gabriela Choi · Answer 1

0.1587

Step-by-step explanation:

Let X be the random variable that represents a return on long-term government bond. We know that X has a mean of 6.0 and a standard deviation of 9.9, in order to compute the approximate probability that your return on these bonds will be less than - 3.9 percent in a given year, we should compute the z-score related to - 3.9, i. e., (-3.9-6.0) / 9.9 = - 1. Therefore, we are looking for P (Z < - 1) = 0.1587