Quick Question for you:
A Manager forecasts a bond portfolio return of 10% and estimates a standard deviation of 4%. Assuming a normal returns distribution and that the manager is correct there is:
A) 90% probability that the return will be between 3.2% and 17.2%
B) 90% probability that the return will be between 2.16% and 17.87%
C) 32% probability that the return will be between 6% and 14%
The answer is B, but the question i have is this: Why, in this case, is the standard deviation of 4% used as the standard error? I thought the standard error was s/sqrt(n)
Are the two interchangable?作者: whew1110 时间: 2013-4-3 16:01
Sorry B) should read 95% prob….作者: whew1110 时间: 2013-4-3 16:03
I would say A is closest to correct interval. 90% probability in twotailed test is between 1.65 and 1.65 st. dv. So true interval would be between 3.4 and 16.6.
B interval is correct with 95% probability.
