**Could you please check if answers B are correct. And how am I suppose to answer C? I need some help thanks.****

A. Calculate the mean and standard deviation of the following securities' returns:

Year Computroids Inc. Blazers Inc.

1 10% 5%

2 5% 6%

3 -3% 7%

4 12% 8%

5 10% 9%

to calculate mean = sum / n

standard deviation = 1/N((xiu)^2)

Computroids Inc.

mean/E(r) = (10%+5% - 3% + 12% + 10%) /5 =6.8

standard deviation = sqrt{[(.1-068)²+(.05-068)²+(-.03 - 068)²+(.12-068)²+(.1-.068)²] / 5-1} = 5.418

= sqrt{[0.001 + 0.0003 + 0.0096 + 0.0027 + 0.001] / 4} =

= sqrt{0.0147/4}

= sqrt{0.0037}

= 0.0606or 6.06%

Blazers Inc.

mean = (5%+6% + 7% + 8% + 9%)=7

• Variance = 1/ (n-1) * ( Sum of squared deviations)

where

n =5

Standard Deviation = Sqrt{[ (0.05-0.07) ^2 + (0.06-0.07) ^2+ (0.07-0.07) ^2 + (0.08-0.07) ^2+ (0.09-0.07) ^2] / 4}

= Sqrt{0.001/4}

= Sqrt{0.0003}

= 0.0158or 1.58%

B. Assuming these observations are drawn from a normally distributed probability space, we know that about 68% of values drawn from a normal distribution are within one standard deviation away from the mean or expected return; about 95% of the values are within two standard deviations; and about 99.7% lie within three standard deviations.

Using your calculations from part A, calculate the 68%, 95%, and 99% confidence intervals for the two stocks. To calculate the 68%, you would calculate the top of the confidence interval range by adding one standard deviation to the expected return, and calculate the bottom of the confidence interval by subtracting one standard deviation from the expected return. For 95%, use two standard deviations, and for 99%, use three.

Your answer should show three ranges from the bottom of the confidence interval to the top of the confidence interval.

B.

Computroids Inc.

68% confidence interval = 6.8 - 6.06 , 6.8+6.06 = (0.74 , 12.86)

95% confidence interval = 6.8- (2*6.06), 6.8+(2*6.06) = (-5.32 , 18.92)

99% confidence interval = 6.8- (3*6.06), 6.8+(3*6.06) = (-11.38 , 23.98)

Blazers Inc.

68%= 7- 1.58, 7 + 1.58= ( 5.42 , 8.58)

95% = 7- (2*1.58), 7+(2*1.58) = (3.84 , 10.16)

99% = 7- (3*1.58), 7+(3*1.58) = (2.26 , 11.74)

C. For each security, would a return of 14% fall into the 68% confidence interval range? If not, what confidence interval range would it fall into, or would it be outside all three confidence intervals?