Andrew plans to retire in 50 years He is thinking of investi

Andrew plans to retire in 50 years. He is thinking of investing his retirement funds in stocks, so he seeks out information on past returns. He learns that over the 101 years from 1900 to 2000, the real (that is, adjusted for inflation) returns on U.S. common stocks had mean 9.2% and standard deviation 20.2%. The distribution of annual returns on common stocks is roughly symmetric, so the mean return over even a moderate number of years is close to Normal.

What is the probability (assuming that the past pattern of variation continues) that the mean annual return on common stocks over the next 50 years will exceed 11%? (

Solution

What is the probability (assuming that the past pattern of variation continues) that the mean annual return on common stocks over the next 50 years will exceed 11%? (