Consider the following table for different assets for 1926 through 2011. Series
ID: 2798593 • Letter: C
Question
Consider the following table for different assets for 1926 through 2011. Series verage return Standard Deviation Large-company stocks Small-company stocks Long-term corporate bonds Long-term government bonds Intermediate-term government bonds U.S. Treasury bills Inflation 11.8 % 16.5 6.4 6.1 5.5 3.6 3.1 20.3% 32.5 8.4 9.8 5.7 3.1 4.2 Requirement 1: What range of returns would you expect to see 68 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 answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Expected range of returns % to Requirement 2: What about 95 percent of the time? (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 answer as a percentage rounded to 2 decimal places (e.g., 32.16)) Expected range of returns 11% to 23.00 %Explanation / Answer
1.
68% of the returns are within 1 standard deviation from the mean.
Expected range = mean +/- 1*std dev
= 6.4% + /- 8.4%
Range =-2% to 14.8%
b.
95% of the returns are within 2 standard deviation from the mean.
Expected range = mean +/- 2*std dev
= 6.4% + /- 2*8.4%
Range = -10.40% to 23.20%