Consider the following table for the total annual returns for a given period of
ID: 2808481 • Letter: C
Question
Consider the following table for the total annual returns for a given period of time Average return Standard Deviation 20.6% 33.0 8.5 9.4 5.7 3.1 4.2 Series stocks 16.4 5.2 Sma-company stocks Long-term corporate bonds Long-term govenment bonds Intermediate-term government bonds U.S. Treasury bills Inflation 5.6 3.8 What range of returns would you expect to see 68 percent of the time for long-term corporate bonds? (A negative answer 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 and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Expected range of returns What about 95 percent of the time? (A negative answer should be indicated by a minus sign. Input your answers from lowest to highest to receive credit for your answers. Do not %to round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Expected range of returns %toExplanation / Answer
a). The range of returns you would expect to see 68 percent of the time is the mean plus or minus 1 standard deviation, or:
R = ± 1 = 5.2% ± 1(8.5%) = –3.30% to 13.70%
b). The range of returns you would expect to see 95 percent of the time is the mean plus or minus 2 standard deviations, or:
R = ± 2 = 5.2% ± 2(8.5%) = –11.80% to 22.20%