You are given the following historical data regarding different investment opportunities.

Based on historical data (Annual Stats for 1996-2006)

Investment Average return Standard deviation

Small-Cap Stocks 18.0% 15.0%

Large-cap stocks 15.0% 15.0%

U.S Treasury bonds 5.4% 8.35%

U.S. Treasury bills 4.1% 3.25%

(a) What is the range of returns for large cap stocks you would expect to see 68% of the time?

b) How often will you make money on large cap stocks? Justify your response. Hint: Use the normal distribution to see how often you are in the positive return range.

(c) Given this table, would you choose to invest in small cap stocks over large cap stocks? Justify your answer in one sentence.