Question
Asked Nov 24, 2019
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I need help with this problem and want to set up for excel with formulas.

You have an investment with the following history of returns:
3.
30
-10%a
201
50
25%a
6C
40
80
-22%a
19%a
43%aa
26%a
10%a
13%a
You believe that the history ofreturns for this investment is a good indication ofwhat to
expect going forward. What is the expected return, standard deviation of returns, and
95% confidence interval for this investment?T
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You have an investment with the following history of returns: 3. 30 -10%a 201 50 25%a 6C 40 80 -22%a 19%a 43%aa 26%a 10%a 13%a You believe that the history ofreturns for this investment is a good indication ofwhat to expect going forward. What is the expected return, standard deviation of returns, and 95% confidence interval for this investment?T

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Expert Answer

Step 1

Value of Z at the 95% Confidence Level = 1.96

 

Calculation of expected return, standard deviation and lower and upper limit of 95% confidence interval of the investment is as follows:

 

Expected return is calculated by using AVERAGE function of excel:

To open the "AVERAGE function" window - MS-Excel --> Formulas --> More Function --> Statistical --> AVERAGE.

 

Standard Deviation is calculated by using STDEV.S function of excel:

To open the "STDEV.S function" window - MS-Excel --> Formulas --> More Function --> Statistical --> STDEV.S.

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A B Return on Investment Year 0.19 0.1 -0.1 0.26 0.25 0.13 |-0.22 0.43 AVERAGE(B2:B9) - STDEV.S(B2:B9) =B10-1.96*B1l =B10+1.96 B1l 2 1 3 2 43 5 4 6 5 7 6 8 7 9 8 10 Expected Return 11 Standard Deviation 12 Lower Limit of 95% Confidence Level 13 Upper Limit of 95% Confidence Level

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Step 2

The result of the above ta...

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A B Return on Year 1 Investment 19% 10% -10% 26% 25% 13% -22% 43% 13,00% 1 2 2 3 3 4 4 5 6 6 7 7 8 9 10 Expected Return 20.74% -27.66% 53.66% 11 Standard Deviation 12 Lower Limit of 95% Confidence Level 13 Upper Limit of 95% Confidence Level

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