For each security, would a return of 14% fall into the 68% confidence interval range? If not, what confidence interval range would it fall into, or would it be outside all three confidence intervals?

For each security, would a return of 14% fall into the 68% confidence interval range? If not, what confidence interval range would it fall into, or would it be outside all three confidence intervals?

Calculate
the mean and standard deviation of the following securities’ returns:

Year

Computroids Inc.

Blazers Inc.

1

10%

5%

2

5%

6%

3

–3%

7%

4

12%

8%

5

10%

9%

B. Assuming
these observations are drawn from a normally distributed probability space, we
know that about 68% of values drawn from a normal distribution are within one
standard deviation away from the mean or expected return; about 95% of the
values are within two standard deviations; and about 99.7% lie within three
standard deviations.

Using your calculations from part A, calculate the 68%, 95%, and 99% confidence
intervals for the two stocks. To calculate the 68%, you would calculate the top
of the confidence interval range by adding one standard deviation to the
expected return, and calculate the bottom of the confidence interval by
subtracting one standard deviation from the expected return. For 95%, use two
standard deviations, and for 99%, use three.

Your answer should show three ranges from the bottom of the confidence interval
to the top of the confidence interval.

C. For
each security, would a return of 14% fall into the 68% confidence interval
range? If not, what confidence interval range would it fall into, or would it
be outside all three confidence intervals?


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