Question

1) Velma Vasquez, fund manager of the Vasquez Value Fund, manages a portfolio of 250 common stocks. Velma relies on various statistics, such as variance, to assess the overall risk of stocks in an economic sector. Her staff reported that for a sample 14 utility stocks the mean annualized return was 14% and that the variance was 3%. Assume that annualized returns are normally distributed. The 95% confidence interval for the population variance of annualized returns is _______.

0.018 to 0.064

0.016 to 0.078

0.017 to 0.066

0.016 to 0.075

0.020 to 0.080

2)

Velma Vasquez, fund manager of the Vasquez Value Fund, manages a portfolio of 250 common stocks. Velma relies on various statistics, such as variance, to assess the overall risk of stocks in an economic sector. Her staff reported that for a sample 14 utility stocks the mean annualized return was 14% and that the variance was 3%. Assume that annualized returns are normally distributed. The 90% confidence interval for the population variance of annualized returns is _______.

		0.018 to 0.064
		0.016 to 0.078
		0.017 to 0.066
		0.016 to 0.075
		0.020 to 0.080 3) In determining the interval estimates for a population variance using the sample variance, it is appropriate to use the values from a chi-square distribution rather than a t-distribution. True False

Answer 1

Q 1)Population variance = 3% = 0.03

95% CI for population variance is

Degrees of freedom = n-1 = 14-1 = 13

The critical value of are

Therefore the 95% CI is

Answer: 0.016 to 0.078

Q 2) 90% CI for Population variance

Degrees of freedom = n-1 = 14-1 = 13

The critical value of are

Therefore the 95% CI is

Answer: 0.017 to 0.066

Q 3)

In determining the interval estimates for a population variance using the sample variance, it is appropriate to use the values from a chi-square distribution rather than a t-distribution.

Answer: True