Assume that historical returns and future returns are independently and identically distributed and drawn from the same distribution.

a. Calculate the

95% confidence intervals for the expected annual return of four different investments included in the tables

?(the time period spans 89? years).

b. Assume that the values in the tables are the true expected return and volatility? (i.e., estimated without? error) and that these returns are normally distributed. For each?investment, calculate the probability that an investor will not lose more than

4 %4%

in the next year.

?(Hint?:

For each? inbestment, you can use the function

?normdist(x?,mean,volatility,1)

in Excel to compute the probability that a normally distributed variable with a given mean and volatility will exceed x where x in this case is

negative 4 %?4%.

Then subtract that probability from? 100% to find the probability that an investor will not lose more than

4 %4%?.)

c. Do the probabilities you calculated in part

?(b?)

make? sense? If? so, explain. If? not, can you identify the? reason?