Exercice V (Portfolio analysis) The annual return on an investment is assumed to have a normal distribution. For concreteness, assume that the investor buys the stock at time t = 0. Let 81 be the stock price at time t = 1 and S 3 R1 = SO - 1. Assume that the expected return is 10% and the volatility is 20%. What is the probability that the annual return will be negative, that is IP(R1 S 0) ? 1. If R1 is assumed to be normal, what can be said about the probability distribution of 31. Do you think that this is realistic '? Could you suggest a better probabilistic model for 8'1