In: Finance
The historical average return for Puella Stock is 8.3%. The historical standard deviation is 17.2%. Based on those numbers answer the following Puella Stock:
a. About one in six years, your return should fall inside the range of ____% to ____%
b. About one in twenty years, your return should fall outside the range of ____% to ____%
c. About one in two hundred years, your return should be greater than ____%
AVERAGE RETURN = 8.3%
STANDARD DEVIATION = 17.2%
MEAN | 8.3 | ||||
YEARS | STANDARD DEVIATION | EFFECTIVE STD DEV RATE | MEAN x EFFECTIVE STD DEV | LOWER BAND | UPPER BAND |
6 | 17.2% | 1.032 | 8.5656 | -0.2656 | 16.8656 |
20 | 17.2% | 3.44 | 28.552 | -20.252 | 36.852 |
100 | 17.2% | 17.2 | 142.76 | -134.46 | 151.06 |
a)
RANGE = 8.3% + 6 x 17.2% = -0.2656% to 16.8656%
About one in six years, your return should fall inside the range of -0.2656% to 16.8656%
b)
RANGE = 8.3% + 20 x 17.2% = -20.252% to 36.852%
About one in six years, your return should fall inside the range of -20.252% to 36.852%
c)
RANGE = 8.3% + 100 x 17.2% = -134.46% to 151.06%
About one in six years, your return should fall inside the range of -134.46% to 151.06%