Assuming that the rates of return associated with a given asset investment are n
ID: 2769983 • Letter: A
Question
Assuming that the rates of return associated with a given asset investment are normally distributed; that the expected return, r, is 19.7%; and that the coefficient variation, CV, is 1.32, answer the following questions:
a. The standard deviation of return is __% (round to three decimal places)
b.
1.The lowest possible expected return associated with a 68% probability of occurrence is __% (round to two decimal places)
2. The highest possible expected return associated with a 68% probability of occurrence is __% (round to two decimal places)
3. The lowest possible expected return associated with a 95% probability of occurrence is __% (round to two decimal places)
4. The highest possible expected return associated with a 95% probability of occurrence is __% (round to two decimal places)
5. The lowest possible expected return associated with a 99% probability of occurrence is __% (round to two decimal places)
6. The highest possible expected return associated with a 99% probability of occurrence is __% (round to two decimal places)
Show work please. Thank you.
Explanation / Answer
a) std dev=mean*CV/100=19.7*1.32/100=0.26
b)
Z value at 68%,95%,99% are0.47,1.64,2.33
Return=mean+-z*stddev
Probability low high 68% 19.5778 19.8222 95% 19.2736 20.1264 99% 19.0942 20.3058