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The continuously compounded annual return on a stock is normally distributed with a mean of 24%...

The continuously compounded annual return on a stock is normally distributed with a mean of 24% and standard deviation of 31%. With 95.45% confidence, we should expect its actual return in any particular year to be between which pair of values?

a. −38.0% and 86.0%

b.−28.0% and 86.0%

c.−24.7% and 72.7%

d.−12.5% and 62.5%

Solutions

Expert Solution

Z value corresponding to 95.45% confidence interval is 2

Hence,
Lower end=mean-2*standard deviation=24%-2*31%=-38.0000%

Upper end=mean+2*standard deviation=24%+2*31%=86.0000%

Option A

jeff jeffy answered 2 years ago
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