1. A stock has an annual return of 12 percent and a standard deviation of 56 percent. Assuming returns are normally distributed, what is the smallest expected loss over the next year with a probability of 1 percent? Does this number make sense? Why or why not?
2. Two people A and B want to become millionaires. Starting at the age of 28 each contribute $500 monthly toward retirement. A goes into a 9.5% investment and B invests into an 11% investment. At what age will they reach their goal? What additional contributions need to be made for friend A to catch up to friend B and reach the same goal at the same time? Compounded monthly.