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Assume the portfolio returns for a large population of large cap equity funds has a standard...

Assume the portfolio returns for a large population of large cap equity funds has a standard deviation of 6.9 %, and returns are independent across funds. If you are collecting a random sample of fund returns and want the standard deviation of sample mean distribution to be at most 1.5 %, what is the size of the sample you must collect?

The answer should be 22.

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Answer #1

Sample standard deviation = Population Standard Deviation/(Sample Size)0.5
1.5% = 6.9%/( Sample Size)0.5
Sample Size = (6.9%/1.5%)2 = 21.16 so 22

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