Question

Asked Nov 7, 2019

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To analyze the risk, or volatility, associated with investing in General Electric common

stock, a sample of the eight quarterly percent total returns was identified as shown below

(Charles Schwab website, January 2012). The percent total return includes the stock price

change plus the dividend payment for the quarter.

20.0 20.5 12.2 12.6 10.5 5.8 18.7 15.3

a. What is the value of the sample mean? What is its interpretation?

b. Compute the sample variance and sample standard deviation as measures of volatility

for the quarterly return for General Electric?

c. Construct a 95% confidence interval for the population variance?

d. Construct a 95% confidence interval for the population standard deviation?

Step 1

**Solution:**

**a.The sample mean is obtained below:**

The sample mean quarterly total return for General Electric is **3.2%.**

Step 2

**Interpretation:**

The sample mean is the estimate of population mean so the population mean percent total return per quarter for General Electric is 3.2%.

Step 3

**The sample variance is obtained below:**

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