Andrew plans to retire in 40 years. He plans to invest part of his retirement funds in stocks, so he seeks out information on past returns. He learns that from 1964 to 2013, the annual returns on U. S. common stocks had mean 13.3% and standard deviation 17.0%.6 The distribution of annual returns on common stocks is roughly symmetric, so the mean return over even a moderate number of years is close to Normal. 1. What is the probability (assuming that the past pattern of variation continues) that the mean annual return on common stocks over the next 40 years will exceed 10%? Give your answer to 2 decimal places.
2. What is the probability that the mean return will be less than 5%? Give your answer to 3 decimal places.