Question

The average annual return over the period​ 1886-2006 for stocks that comprise the​ S&P 500 is 8​%, and the standard deviation of returns is 20​%. Based on these numbers what is a​ 95% confidence interval for 2007​ returns?

Answer 1

Answer:

The confidence interval for 2007​ returns are 32%, 48 %

Explanation:

As per 9% rule

Range = mean +/- 2*Standard deviation

Range = 8 +/- 2*20

Range = 8-40 to 8+40

Range = -32 to 48