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Part 1

You observe a portfolio for five years and determine that its average return is

12.5%

and the standard deviation of its returns in

19.2%.

Would a 30% loss next year be outside the 95% confidence interval for this portfolio?

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Part 1

The low end of the 95% prediction interval is

enter your response here%.

(Enter your response as a percent rounded to one decimal place.)

A.Yes, you can be confident that the portfolio will not lose more than 30% of its value next year. This is because the low end of the prediction interval is less than

30%.

B.Yes, you can be confident that the portfolio will not lose more than 30% of its value next year. This is because the low end of the prediction interval is greater than

30%.

C.No, you cannot be confident that the portfolio will not lose more than 30% of its value next year. This is because the low end of the prediction interval is less than

30%.

D.No, you cannot be confident that the portfolio will not lose more than 30% of its value next year. This is because the low end of the prediction interval is greater than

30%.