Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help me with this, I keep getting it wrong. sume that historical returns and future returns are independently and identically distributed and drawn from

Please help me with this, I keep getting it wrong.image text in transcribedimage text in transcribedimage text in transcribed

sume 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 EEE (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 3% 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 3%. Then subtract that probability from 100% to find the probability that an investor will not lose more than 3%.) c. Do all the probabilities you calculated in part b) make sense? If so, explain. If not, can you identify the reason? a. Calculate the 95% confidence intervals for the expected annual return of four different investments included in the tables EEa (the dates are inclusive, so the time period spans 89 years). Upper Bound Lower Bound Confidence interval for small stocks is (Round to two decimal places.) Lower Bound Upper Bound Confidence interval for S&P 500 is (Round to two decimal places.) Lower Bound Upper Bound Confidence interval for corporate bonds is (Round to two decimal places.) Upper Bound Lower Bound Confidence interval for Treasury bills is (Round to two decimal places 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 3% in the next year. (Hint: For each inbestment, you can use the function

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance QuickStart Guide

Authors: Morgen Rochard

1st Edition

1945051019, 978-1945051012

More Books

Students also viewed these Finance questions

Question

What are the objectives of job evaluation ?

Answered: 1 week ago

Question

Write a note on job design.

Answered: 1 week ago

Question

Compute the derivative of f(x)cos(-4/5x)

Answered: 1 week ago

Question

Discuss the process involved in selection.

Answered: 1 week ago

Question

What is the relationship between humans and nature?

Answered: 1 week ago