You determined that the returns from Grain Processing Inc (GPI) are normally distributed with a mean of 10% and standard deviation of 8%. In addition, you are confident that past returns are good indicators of future returns. If you buy shares in GPI. answer in Finance terms, not Satistics. a) What is the probability that your return will be negative? b) What is the probability that your return will be above 16%?
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
You determined that the returns from Grain Processing Inc (GPI) are
a) What is the probability that your return will be negative?
b) What is the probability that your return will be above 16%?
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