Question

A portfolio has average return of 13.2 percent and standard deviation of returns of 18.9 percent. Assuming that the portfolioi's returns are normally distributed, what is the probability that the portfolio's return in any given year is between -24.6 percent and 32.1 percent? A. 0.815 B. 0.835 ос C. 0.950 D. 0.975 A portfolio has expected return of 13.2 percent and standard deviation of 18.9 percent. Assuming that the returns of the portfolio are normally distributed, what is the probability that, in any given year, the return of the portfolio will be less than -43.5 percent. A. 0.005 B.0.01 OC.0.16 D. 0.025 B. 0.01

Answer 1

A portfolio has average return of 13.2% and standard deviation of 18.9%, the probability that the portfolio's return is given as-24.6% and 32.1%. The rule of 68-95-99 confidence interval will be applied here. For 68% interval the formula will be as follows: 68% interval upper limits. Average return + 1 x Standard deviation -13.2%+ 1x18.9% 32.1% So, the probability will be 68%/2-34% For 95% interval the formula will be as follows: 95% interval lower limit = Average return-2 Standard deviation -13.2%-2x18.9% -13.2%-37.8% = |-24.6% So, the probability will be 95%/2-47.5% Calculate the total probability as follows: Total probability-34% + 47.5% 81.5% 0.815 Hence, the correct option is: (A) 0.815

A portfolio has average return of 13.2% and standard deviation of 18.9%. the probability that the portfolio's return is given as less than-43.5%. The rule of 68-95-99 confidence interval will be applied here. For 99% interval the formula will be as follows: 9 9% interval lower limit-Average return-3x Standard deviation 13.2%-3x 18.990 13.2%-56.7% -43.5%) Calculate the total probability as follows: Total probability-1-99% -1-0.99 0.01 Hence, the correct option is: (B) 0.01