Over the past five years a stock produced returns of 14 22 1

Over the past five years, a stock produced returns of 14%, 22%, -16%, 2%, and 10%. What is the probability that an investor in this stock will NOT lose more than 8% nor earn more than 21% in any one given year?

Solution

Number of years in which invester lost more than 8% = 1

Number of years in which invester earned more than 21% = 1

Total number of years = 5

probability that an investor in this stock will NOT lose more than 8% nor earn more than 21% in any one given year:

= (5-1-1)/5 = 3/5 = 0.60