Doubling is a return of 100%. Tripling is a return of 200%. Convert to Z-score, then refer to the table.
Z = ( value - mean ) / sdev = ( 100 - 17.1 ) / 43.8 = 1.89
Look up 1.89 on the table to find .9706
P(double) = P(return > 100) = P( Z > 1.89 ) = 1 - .9706 = .0294 or 2.94%
P(triple) = P(return > 200) = P(Z > 4.16 ) = less than 0.003% (table I used cut off at 4)
Assume that the returns from an asset are normally distributed. The average annual return for this asset over a specific period was 17.1 percent and the standard deviation of those stocks in this period was 43.80 percent.
What is the approximate probability that your money will double in value in a single year?
What about triple in value?
I've been working on this question for a while and have no idea what the answer is. I could use some help. Thanks!
