CFA Practice Question
An elderly couple invested in a conservative balanced fund is interested in knowing the range of possible returns. The balanced fund strategy in question has expected annual return of 5% with a standard deviation of 1%. The returns are thought to be normally distributed. What is the 99% confidence interval?
A. [2.73%, 7.28%].
B. [2.53%, 7.48%].
C. [2.43%, 7.58%].
Explanation: The 99% confidence interval will be 5% - 2.575(1%) to 5% + 2.575(1%) = [2.43%, 7.58%].
User Contributed Comments 5
| User | Comment |
|---|---|
| shasha | 1% is the standard error, not standard deviation. |
| lwang014 | we use the standare error to calculate the CI |
| chandsingh | How do we compute standard error without knowing sample size? isnt the calc sd/sqr of N |
| Jaro_S | n=1? |
| 6004895 | 99% should give a wider spread? coz its the last of the con interval. am I right? |