Assume That the Average Annual Historical Return for Shares That

question 86

Multiple Choice

Assume that the average annual historical return for shares that comprise the Australian All Ordinaries index is 10.5%, and the standard deviation of returns is 18.5%. Based on these numbers what is a 95% prediction interval for 2012 returns?

• A) -10%, 10%
• B) -37%, 37%
• C) -18.5%, 18.5%
• D) -26.5%, 47.5%

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Definitions:

Budget Set

The collection of all possible bundles of goods and services that a consumer can afford given their income and the prices of goods.

Interest Rate

The amount of a loan that is subject to interest charges for the borrower, typically expressed as an annual percentage of the current loan balance.

Consumption

Households' practice of using goods and services.

Interest Rate

The interest rate is the percentage of a sum of money charged for its use, determining the cost of borrowing or the reward for saving.