Suppose the average return on an asset is 121 percent and th

Suppose the average return on an asset is 12.1 percent and the standard deviation is 21.7 percent. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel® to determine the probability that in any given year you will lose money by investing in this asset. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Solution

Here, you lose money if the return is less than 0%.

Thus, as NORMDIST gives you the left tailed area of a critical value, we type

=NORMDIST(critical value, mean, standard deviation, cumulative)

Hence, we type

=NORMDIST(0, 12.1, 21.7, 1)

[We type 1 so we accumulate the area to the left]

= 0.288557519 or 28.86% [ANSWER]