Assume that a portfolio Assume that a portfolio of stocks ha

Assume that a portfolio Assume that a portfolio of stocks had an average return of 12% and a standard deviation of 19% over a certain holding period. In which range do the returns fall 99% of the time, assuming the returns are distributed normally? 0 between-26% and 50% 0 between-45% and 69% O between 7% and 31% O between-17% and 48%

Solution

99% of returns should be a part of the 99% confidence interval which is given by the interval range of [mean - 3 x standard deviation: mean + 3 x standard deviation]

Mean = 12 % and Standard Deviation = 19 %

Interval of Returns = 12 - 3 x 19 - 12 + 3 x 19 = - 45 % to 69 %

Hence, the correct option is (b).