Question

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 5.7 8.6 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 Requirement 1: What range of returns would you expect to see 95 percent of the time for long-term corporate bonds? What about 99 percent of the time?

Answer 1

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TATS Aicrosoft Excel (Product A File Home Insert Page Layout Formulas Data Review View Add-Ins Cut - AutoSum General A A Wrap Text Calibri 11 Fill ECopy A Merge & Center Insert Delete Format Paste S % Conditional Format Cell Sort & Find & Format Painter Clear ble Styles er Select Formatting Clipboard Font Alignment Number Shules Cells Editing H336 A C E G H K 324 325 LONG TERM CORPORATE BONDS FORMULA FOR CACCULATING THE RANGE OF RETURNS = EXPECTED RETURN -/+(Z VALUE) (SD) 326 327 EXPECTED RETURN 328 5,7 STANDARD DEVIATION (SD) 8.6 329 330 Z VALUE 331 AT 95% PREDICTION LEVEL 2 332 (LOWER VALUE, HIGHER VALUE) (5.7-(2)(8.6), 333 334 5.7 (2)(8.6)) (-11.50%, 22.90%) 335 ANS 336 Z VALUE= 337 AT 99% PREDICTION LEVEL 3 338 339 (LOWER VALUE, HIGHER VALUE) 5.7 (3)(8.6)) (5.7-(3)(8.6) 340 (-20.10%, 31.50%) 341 ANS 342 14 MEAN STDVassignment DEAR GP MATHS 130 % Sheet2 COV freq MATRIX INTERVAL, NORMAL HYPOTHESIS corr REGRESSION TIME SERIES TREND range CAMERA Re erences 12:43 ENG 5-06-2019