Question

if a portfolio has an historical return of 8% with a standard deviation of 10, what can we expect for the range of returns 95% of the time in any given year?

Answer 1

The range of return of the portfolio is from -12% to 28%.

The average return is the return booked by the company over a period of time. It shows the median value of the overall return. It is calculated by adding up all the returns generated by the company over a specified period and then dividing it by the number of periods.

Average annual historical return = 8%

Standard deviation = 10%

The downside can go up to 8% -2*10% = -12%

Upside it can go up to 8% +2*10% = 28%

So, the range of returns of the portfolio is between -12% to 28%

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