If the expected return is 8% and the standard deviation is 1%, you can be 95%...

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Question

If the expected return is 8% and the standard deviation is 1%, you can be 95%...

If the expected return is 8% and the standard deviation is 1%, you can be 95% confident that next year's return will not be above:

-8%

-10%

-9%

-11%

-6%

business finance

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Answer 1

Answer #1

Answer is 10%

Expected Return = 8%
Standard Deviation = 1%

95% Confidence Interval = Expected Return - 2 * Standard Deviation, Expected Return + 2 * Standard Deviation
95% Confidence Interval = 8% - 2 * 1%, 8% + 2 * 1%
95% Confidence Interval = 8% - 2%, 8% + 2%
95% Confidence Interval = 6%, 10%

Therefore, next year’s return will not be above 10%

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Answer 2

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