You are choosing between these four investments and you want to be 95% certain that you do not lose more than 8.00 % on your in
vestment. Which investments could you choose?
Small Stocks S&P 500 Corporate Bonds T-Bills
Average return 18.37% 11.84% 6.47% 3.46%
Standard Deviation 38.79% 20.01% 6.98% 3.14%
of returns
(Select the best choice below.)
Which of the following have the lower bound of the estimated range greater than
18.00 %?
A. All of the Investments
B. T-Bills only
C. Long-term Government of Canada Bonds and T-Bills
D. S&P TSX and S&P 500 in CAD
E. Long-term Government of Canada Bonds and S&P 500 in CAD
Small Stocks S&P 500 Corporate Bonds T-Bills
Average return 18.37% 11.84% 6.47% 3.46%
Standard Deviation 38.79% 20.01% 6.98% 3.14%
of returns
(Select the best choice below.)
Which of the following have the lower bound of the estimated range greater than
18.00 %?
A. All of the Investments
B. T-Bills only
C. Long-term Government of Canada Bonds and T-Bills
D. S&P TSX and S&P 500 in CAD
E. Long-term Government of Canada Bonds and S&P 500 in CAD
1 answer:
Answer:
option B
Explanation:
In other to know how return fluctuation can be predicted with for instance, x%, predictability, one has to look at the normal distribution curve of return (average returns) to standard deviation of those returns. (check the attached file for additional details).
Hence, to be 95% sure that investment losses are less than 8% one needs to look at 95% of all returns which infact Mean return plos or minus 20. If the lower bound of this interval is less than 8% then the investment needs to be selected
check attached file for additional details
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