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

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? 56) A) -30.6%, 54.6% B) -1.5%, 21.8% C) -10.7%, 32.8% D) -30.6%, 76.4%

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Answer #1

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%

The answer is A)

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