Question

16. Investment Risk Investors not only desire a high return on their money, but they would also like the rate of return to be stable from year to year. An investment manager invests with the goal of reducing volatility (year-to-year fluctuations in the rate of return). The following data represent the rate of return (in percent) for his mutual fund for the past 12 years. 13.8, 9.6, 15.9, 12.4, 10.0, 10.3, 12.4, 8.7, 11.3, 14.9, 6.6, 6.7  

Determine the sample standard deviation.

Construct a 95% confidence interval for the population standard deviation of the rate of return.

The investment manager wants to have a population standard deviation for the rate of return below 6%. Does the confidence interval validate this desire

Answer 1