Consider the following table for the total annual returns for a given period of

Question

Consider the following table for the total annual returns for a given period of time. What range of returns would you expect to see 95 percent of the time for long-term corporate bonds? (Do not include the percent signs (%). Negative amount should be indicated by a minus sign.Input your answers from lowest to highest to receive credit for your answers. Round your answers to 2 decimal places (e.g., 32.16).) Expected range of returns % to % Requirement 2: What about 99 percent of the time? (Do not include the percent signs (%). Negative amount should be indicated by a minus sign. Input your answers from lowest to highest to receive credit for your answers. Round your answers to 2 decimal places (e.g., 32.16).)

Explanation / Answer

a)Range of return with 95% probability = Average return +or - (2 *standard deviation )

                                                    = 5.7 +or - ( 2*8.6)

we will solve this equation by taking once a + sign and once a - sign

so 5.7 + ( 2*8.6) =5.7+17.20 =22.90%

    5.7 - ( 2 * 8.6) = 5.7 -17.20 = - 11.50%

so range is - 11.50 to 22.90

2)Range of return with 99 % probability =Average return + or - (3* standard deviation)

                                                     = 5.70 + or - ( 3*8.60)

we will solve this equation by taking once a + sing and once a - sign

5.70 + ( 3 * 8.60 ) = 5.70+ 25.80 = 31.50

5.70 - ( 3*8.60) = 5.70- 25.80    = -20.10

so range is - 20.10 to 31.50

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