- CFA Exams
- CFA Exam: Level I 2021
- Study Session 3. Quantitative Methods (2)
- Reading 9. Common Probability Distributions
- Subject 8. The Standard Normal Distribution

###
**CFA Practice Question**

An investor estimated the mean return of a portfolio at 12% and the standard deviation at 16%. What is the 95% confidence interval for the mean return on this portfolio?

B. [-14.32%, 18.32%]

C. [-5.42%, 18.58%]

A. [-19.36%, 43.36%]

B. [-14.32%, 18.32%]

C. [-5.42%, 18.58%]

Correct Answer: A

The relevant confidence interval is given by X-bar +- 1.96 x 16.

###
**User Contributed Comments**
6

User |
Comment |
---|---|

kamin |
return 12+-1.96*16 |

pisanc06 |
Dont forget to put the order of operations in the equation! 12 + or - the product of(1.96*16) |

bidisha |
I dont get this q |

davcer |
bidisha, with 95% of confidence you get a Z of 1.96, so your range is mean+/- std dv(Z) |

lordcomas |
Where do you get the -19.36% from? I totally get the 43.36% but not the other result, can someone please explain? thanks. |

jimmyvo |
12 + 1.96 * 16; and 12 - 1.96 * 16 Do multiplication first. Order of operations applies. |