Suppose the returns on long-term corporate bonds and T-bills are normally distributed. Assume for a certain time period, long-term corporate bonds had an average return of 6.7% and a standard deviation of 10%. For the same period, T-bills had an average return of 5.2% and a standard deviation of 4.2%. Use the NORMDIST function in Excel to answer the following questions:

Required:

(a)

What is the probability that in any given year, the return on long-term corporate bonds will be greater than 10 percent? Less than 0 percent? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)

Probability of return greater than 10 percent ____% Probability of return less than 0 percent ____%

(b)

What is the probability that in any given year, the return on T-bills will be greater than 10 percent? Less than 0 percent? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)

Probability of T-bill return greater than 10 percent ____ % Probability of T-bill return less than 0 percent ____%

(c)

In one year, the return on long-term corporate bonds was 5.3 percent. How likely is it that such a low return will recur at some point in the future? T-bills had a return of 11.72 percent in this same year. How likely is it that such a high return on T-bills will recur at some point in the future? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)

Probability of return on long-term corporate bonds less than 5.30 percent _____%

Probability of T-bill return greater than 11.72 percent _____%