A fund manager tells an investor that the average return of his portfolio is 11% and the standard deviation of 8% (his level of risk or volatility). The investor asks a number of questions: 1) What is the range of values taken by the profitability of his equity portfolio with 95% probability. (Build a confidence interval)

2) What is the range of values taken by the profitability of its equity portfolio with a 90% probability. (Build a confidence interval)

3) What is the range of values taken by the profitability of its equity portfolio with a 99% probability. (Build a confidence interval)

4) What is the probability that the return on his portfolio is less than 15%.

5) What is the probability that the return on his portfolio is less than 9%.

6) What is the probability that the return on his portfolio will be higher than 15%?

7) What is the probability that the return on his portfolio will be between 7% and 15%?

8) What is the value of the profitability of my portfolio if I have a 20% probability.

9) What is the value of the profitability of my portfolio if we have a probability of less than 10%?

Exercise 2 The average basket at Monoprix is 35 euros. We add that the variance of this average basket is 100. The shop manager asks you to calculate the confidence interval of the number of purchases of the last 10 people who have just entered the shop. Assuming that the distribution of consumers follows a normal law calculate A 60% confidence interval An 80% confidence interval

Exercises 3 Suppose that the average return on a portfolio of shares is 12% and its standard deviation is 22% per year. You want to calculate the following probabilities, assuming that this distribution is normal. (You can use the normal distribution table in the Appendix to answer)

1) What is the probability that the portfolio return will exceed 20%?

2) What is the probability that the portfolio return will be between 12% and 20%?

3) What is the probability that the return will exceed 10%?