Suppose the returns on long-term corporate bonds and T-bills are normally distributed. Based on the historical record, use NORMDIST function in Excel text to answer the following questions: Refer to Figure 12.10.

In 1979, the return on long-term corporate bonds was 4.18 percent. How likely is it that such a low return will recur at some point in the future? (Round your answer to 2 decimal places. (e.g., 32.16))

Probability %

T-bills had a return of 10.56 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? (Round your answer to 2 decimal places. (e.g., 32.16))

Probability. %

FIGURE 12.10 Historical Returns, Standard Deviations, and Frequency Distributions: 1926-2010 Average Return Standard Deviation Series Distribution Large-company stocs 11.9% 20.4% Iul Small-company stocks 16.7 32.6 Long-term corporate bonds 6.2 8.3 Long-term government 5.9 9.5 bonds Intermediate-term 5.5 5.7 government bonds U.S. Treasury bills 3.7 3.1 Infiation 3.1 4.2 Tho 1933 small-company stocks total roturn was 142.9 porcont. SOURCE: Modified from Stocks, Bonds, Bills, and Inflation: 2011 YearbookTM, annually updates work by Roger G. Ibbotson and Rex A Sinquefield Chicago: Morningstar). All rights reserved