Question

You observe a portfolio for five years and determine that its average return is 12.2% and the standard deviation of its returns in 19.2%. Would a 30% loss next year be outside the 95% confidence interval for this portfolio? The low end of the 95% prediction interval is %. (Enter your response as a percent rounded to one decimal place.) O A. Yes, you can be confident that the portfolio will not lose more than 30% of its value next year. This is because the low end of the prediction interval is greater than - 30%. OB. No, you cannot be confident that the portfolio will not lose more than 30% of its value next year. This is because the low end of the prediction interval is greater than - 30%. OC. No, you cannot be confident that the portfolio will not lose more than 30% of its value next year. This is because the low end of the prediction interval is less than - 30%. OD. Yes, you can be confident that the portfolio will not lose more than 30% of its value next year. This is because the low end of the prediction interval is less than - 30%.

Answer 1

{D} Yes , you can be confident that portfolio will not lose more than 30 Percent of it's value next year. This is because the low end of the low end of the interval level is less than - 30 Percent.

Confidence level of a portfolio represents that a manager is assured of losing only upto a certain limit .