Sarah's Portfolio Has an Expected Annual Return at 8%,with an Annual

question 84

Multiple Choice

Sarah's portfolio has an expected annual return at 8%,with an annual standard deviation at 12%.If her investment returns are normally distributed,then in any given year Sarah has approximately ______________________.

• A) A 50% chance that the actual return will be greater than 8%
• B) About a 68% chance that the actual return will fall within 4% and 20%
• C) About a 68% chance that the actual return will fall within -20% and 20%
• D) About a 95% chance that the actual return will fall within -4% and 28%.

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Definitions:

Number

A mathematical object used to count, measure, and label.

Chi-Squared Distribution

A probability distribution widely used in inferential statistics for hypothesis testing and in constructing confidence intervals, especially useful for categorical data.

Degrees of Freedom

The number of independent pieces of information available to estimate another piece of information or the parameters in a statistical model.

Mean

The average value of a set of numbers, obtained by dividing the sum of all the numbers by the count of numbers.