The major stock market indexes had mixed results in 2001 The

The major stock market indexes had mixed results in 2001. The mean one-year return for stocks in the S&P 500, a group of 500 very large companies, was 0.00%. The mean one-year return for the NASDAQ, a group of 3,200 small and medium-sized companies, was

Solution

For S&P 500

a) z(0) = 0 - (0/20)) = 0

P(x>0) = P(z>0) = 0.1587

For NASDAQ

a) Z(0) = (0 - (-1.8/30)) = 0.06

P(x>0) = P(z>0.06) = 0.4721

b) Probability that S & P 500 gained 10% or more

z value of 10 = 0.4602

Therefore probability of Z being greater than 0.4602 is = 0.07

b)Probability that  NASDAQ 3200 gained 10% more

z value of 10 = 0.4721

Therefore probability of z being greater than 0.4721 is 0.05

c) Probability that a stock in S & P 500 lost 20% or more

Z value of -20 = 0.4207

therefore probability of z being less than 0.4207 is 0.01

Probability that a stock in NASDAQ lost 20 % or more

z value of -20 is 0.0228

Therefore probability of z being less than 0.0228 is 0.01

d) Probability that a stock in S& P 500 lost 40% or more

Z value of -40 is 0.3446

Therefore probability of z being less than 0.3446 is 0.02