{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter_10_sol_students

# 1025221 variancesumofr r2t 126481554902942395

This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 14.32% -21.98% -22.20% -31.78% 22.21% 2.07% -3.63% 0.0104625 0.03763 0.0128899 0.0205182 0.0483043 0.0492984 0.1009717 0.0493349 0.0004274 0.0013148 Variance = SUM of (R - R)2 / T - 1 = 0.3311521 / 9 = 0.0367947 Standard deviation = Variance = 0.0367947 = 0.1918194 Standard error = Standard Deviation / T = 0.1918194 / 10 = .01918 or 1.92% 95% Confidence Interval = mean return + or - 2 standard errors, so lower bound = .1093 - 2 × .0192 = .0709 or 7.09% upper bound = .1093 + 2 × .0192 = .1477 or 14.77% Diff: 3 Topic: 10.3 Historical Returns of Stocks and Bonds Skill: Analytical 13) Suppose that you want to use the 10 year historical average return on Microsoft to forecast the expected future return on Microsoft. Calculate the 95% confidence interval for your estimate of the expect return. R + R2 + ... + RN Answer: 3.11 Rannual = 1 = = 31.1% 10 N Year End 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Microsoft Realized Return 88.3% 56.4% 114.6% 68.4% -62.8% 52.7% -22.0% 6.9% 9.2% -0.9% (R - R) 57.24% 25.36% 83.53% 37.29% -93.92% 21.66% -53.04% -24.19% -21.92% -32.02% (R - R)2 0.3276925 0.0642878 0.6977065 0.1390502 0.8821468 0.0469291 0.281292 0.058501 0.0480275 0.1025221 Variance = SUM of (R - R)2 / T - 1 = 2.6481554 / 9 = 0.2942395 Standard deviation = Variance = 0.2942395 = 0.5424385 Standard error = Standard Deviation / T = 0.5424385 / 10 = .0542 or 5.42% 95% Confidence Int...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online