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3 . 8 CAPM: The Capital Asset Pricing Model ( CAPM ) is a financial model that assumes returns on a portfolio are normally distributed.

3.8 CAPM: The Capital Asset Pricing Model (CAPM) is a financial model that assumes returns on a portfolio
are normally distributed. Suppose a portfolio has an average annual return of 15.4%(i.e. an average gain of
15.4%) with a standard deviation of 33.7%. A return of 0% means the value of the portfolio doesn't change,
a negative return means that the portfolio loses money, and a positive return means that the portfolio
gains money. (Keep one decimal place.)
a) What percent of years does this portfolio lose money, i.e. have a return less than 0%?
%
b) What is the cuto for the highest 15% of annual returns with this portfolio?
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