Find the distribution of the return on equity

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Reference no: EM131438804

Question: A formula in financial analysis is: Return on equity = net profit margin * total asset turnover * equity multiplier. Suppose that the equity multiplier is fixed at 4.0, but that the net profit margin is normally distributed with a mean of 3.8% and a standard deviation of 0.4%, and that the total asset turnover is normally distributed with a mean of 1.5 and a standard deviation of 0.2. Set up and conduct a sampling experiment to find the distribution of the return on equity. Show your results as a histogram to help explain your analysis and conclusions. Use the empirical rules to predict the return on equity.

Reference no: EM131438804

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