Q4 Your investment advisor proposes a monthlyincome investment scheme which promises avariable income each month. You will invest in itonly if you are assured an average monthlyincome of at least 500 dollars. Your advisor alsotells you that, for the past 51 months, the schemehad incomes with an average value of 510 dollarsand a standard deviation of 108 dollars.(a) Create a 99% confidence interval for theaverage monthly income of this scheme. (Roundyour answers to 4 decimal places, if needed.)(b) Based on this confidence interval, should youinvest in this scheme?Yes, since the interval contains 500.No, since the interval contains 500.No, since the interval is completely above500.Yes, since the interval is completely above500.Check

Answered: Image /qna-images/answer/436ada68-8793-432c-b4cc-cc7992aa6e03.jpg

Answered: Your investment advisor proposes a…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Your investment advisor proposes a monthly income investment scheme which promises a variable income each month. You will invest in it only if you are assured an average monthly income of at least 630 dollars. Your advisor also tells you that, for the past 41 months, the scheme had incomes with an average value of 652 dollars and a standard deviation of 113 dollars. (a) Create a 90% confidence interval for the average monthly income of this scheme. (Round your answers to 4 decimal places, if needed.) (b) Based on this confidence interval, should you invest in this scheme? O No, since the interval is completely above 630. Yes, since the interval is completely above 630. O Yes, since the interval contains 630. O No, since the interval contains 630. Check
A portfolio with a 25% standard deviation generated a return of 15% last year when T-bills were paying 4.5%. You are considering adding one more stock to your portfolio, the stock will boost the portfolio’s expected return to 20% while also increases the standard deviation to 30%. If you are risk neutral, should you add the stock? Why or why not?
Ophelia O'Brien, VP of Consumer Credit of American First Banks (AFB), monitors the default rate on personal loans at the AFB member banks. One of her standards is "no more than 5% of personal loans should be in default." On each Friday, the default rate is calculated for a sample of 500 personal loans. Last Friday's sample contained 30 defaulted loans. Using = 0.10, the observed z value is
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Suppose portfolio mean return is 25% and standard deviation 30%. Find the 2 standard deviation range. Now you wish to estimate the portfolio's fifth-percentile VaR (the value below which lie 5% of the returns). Will the 5% VaR be greater or less than -30%? Please show your work:
Black Water CO(BWO) TATA Steel (TATA) 1.Estimate the average daily return of each fund using the arithmetic average method. (EXCEL) Below are the historical closing prices for the two funds above. 2. Calculate the standard deviation of each fund (EXCEL) Date BWO TATA 3. Calculate the correlation between the two funds 10/20/2016 113.3374 113.6971 4. Calculate the covariance between the two funds using a) Excel function, Covariance.S 10/21/2016 113.7611 113.6408 and b) using formula (Correlation multiplied by standard deviations of both funds. 10/24/2016 115.1283 114.3635 10/25/2016 114.7624 113.5094 10/26/2016 113.9825 112.383 10/27/2016 113.4626 111.0971 10/28/2016 112.7501 110.7873 10/31/2016 112.6442 111.2285 11/1/2016 111.7969 109.8675 11/2/2016 110.9014 108.4689 11/3/2016 109.8134 107.9433 11/4/2016 109.4282 108.6379 11/7/2016 112.0279 111.2942 11/8/2016 112.7597 111.5852 11/9/2016 113.2797 115.0206 11/10/2016 111.4502 116.8603 11/11/2016 111.4984 119.5448
An investor is trying to decide between 2 mutual funds. Mutual fund #1 offers a slightly higher return than mutual fund #2 so the investor decides that he will invest in mutual fund #1 unless the risk of mutual fund #1 is significantly higher than the risk of mutual fund #2. Using the standard deviation of 101 daily returns as a measure of the risk of the two mutual funds, the investor finds that the standard deviation of mutual fund #1’s daily returns is .81 .95 and the standard deviation of mutual fund #2’s. At the 10% level of significance, should the investor invest in mutual fund #1 or #2?
One measure of the risk or volatility of an individual stock is the standard deviation of the total return (capital appreciation plus dividends) over several periods of time. Although the standard deviation is easy to compute, it does not take into account the extent to which the price of a given stock varies as a function of a standard market index, such as the S&P 500. As a result, many financial analysts prefer to use another measure of risk referred to as beta. Betas for individual stocks are determined by simple linear regression. The dependent variable is the total return for the stock and the independent variable is the total return for the stock market. For this case problem we will use the S&P 500 index as the measure of the total return for the stock market, and an estimated regression equation will be developed using monthly data. The beta for the stock is the slope of the estimated regression equation (b1). The data contained in the file named Beta provides the…

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