Question

The average annual return over the period 1926-2009 for the S&P 500 is 12.0%, and the standard

deviation of returns is 21.3%. Based on these numbers, what is a 95% confidence interval for

2010 returns?

A) -1.5%, 21.8%

B) -10.7%, 32.8%

C) -30.6%, 54.6%

D) -30.6%, 76.4%

Answer 1

C) -30.6%, 54.6%

Step-by-step explanation:

95% Confidence Interval = (Average Return - 2*Standard Deviation, Average Return + 2*Standard Deviation)

=(0.12 - 2*0.213, 0.12 + 2*0.213)

= -30.6%,54.6%

Therefore, The 95% confidence interval for 2010 returns is -30.6%,54.6%.