An asset has returns of 5 percent, 17 percent, -18 percent, and 18 percent for the past 4 years

Finance Apr 01, 2021

An asset has returns of 5 percent, 17 percent, -18 percent, and 18 percent for the past 4 years. Based on this information, what is the 95 percent probability range for any one given year? -11.2 to 22.2 percent -14.0 to 19.5 percent -61.5 to 72.5 percent -28.0 to 39.0 percent -28.0 to 22.2 percent

Expert Solution

Computation of 95% Probability Range of Returns:

95% Probability Range of Returns = 5.50%±2(16.74%)

= 5.50%-2(16.74%) = -28.0%

= 5.50%+2(16.74%) = 39.0%

So, 95% Probability Range of Returns is -28.0% to 39.0%.

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