Question

Problem 10-17 Return Distributions [LO 3]

Consider the following table for the total annual returns for a given period of time.

Series	Average return		Standard Deviation
Large-company stocks	11.7	%	20.6	%
Small-company stocks	16.4		33.0
Long-term corporate bonds	6.1		8.8
Long-term government bonds	6.1		9.4
Intermediate-term government bonds	5.6		5.7
U.S. Treasury bills	3.8		3.1
Inflation	3.1		4.2

What range of returns would you expect to see 95 percent of the time for long-term corporate bonds? (A negative answer should be indicated by a minus sign. Input your answers from lowest to highest to receive credit for your answers. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected range of returns             % to  %

What about 99 percent of the time? (A negative answer should be indicated by a minus sign. Input your answers from lowest to highest to receive credit for your answers. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected range of returns             % to  %

Answer 1

AT 95% LEVEL : EXPECTED RANGE OF RETURNS : -11.50% TO 23.70%

AT 99% LEVEL : EXPECTED RANGE OF RETURNS : -20.30% TO 32.50%