Problem

Recall the normal distribution we covered in class.

The compounded annual return on a stock is normally distributed with a mean of 20% and standard deviation of 30%. With 95% confidence, we should expect its actual return in any particular year to be between which pair of values?

Personal Question: How do you calculate the Z score in order to apply it to the mean and SD?

Answers:

A.) -40.0% and 80.0%

B.) -30.0% and 80.0%

C.) -20.6% and 60.6%

D.) -10.4% and 50.4%