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? (Negative amount should be indicated by a minus sign. Input your answers from lowest to highest to receive credit for your answers Do not round intermediate calculations Enter your answers as a percentage rounded to 2 decimal places (e.g., 32 16) ) What about 99 percent of the time7 (Negative amount should be indicated by a minus sign. Input your answers from lowest to highest to receive credit for your answers. Do not round intermediate calculation* Enter your answers as a percentage rounded to 2 decimal places (e g., 32.16).)

Explanation / Answer

Requirement 1

Using Excel Formula

Z= normsinv(Probability)

Z=  normsinv(95%)

Z = 1.64485363

Expected Range of Return :

Higher Range = Average Return + SD*Z

Higher Range = 6.3 + 9.6* 1.64485363

Higher Range = 22.09%

Lower Range = Average Return - SD*Z

Lower Range = 6.3 - 9.6* 1.64485363

Lower Range = -9.49%

Expected Range of Return -9.49% to 22.09%

Requirement 2

Using Excel Formula

Z= normsinv(Probability)

Z=  normsinv(99%)

Z = 2.326348

Expected Range of Return :

Higher Range = Average Return + SD*Z

Higher Range = 6.3 + 9.6*2.326348

Higher Range = 28.63%

Lower Range = Average Return - SD*Z

Lower Range = 6.3 - 9.6* 2.326348

Lower Range  = -16.03%

Expected Range of Return -16.03% to 28.63%

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