The mean change in the value of a portfolio of trading assets has been estimated to be 0 with a standard deviation of 20 percent.Yield changes are assumed to be normally distributed. What is the maximum yield change expected if a 90 percent confidence (one-tailed) limit is used?
A)3.30%.
B)20.0%.
C)33.0%.
D)39.2%.
E)46.6%.

Question

Quizplus · Accepted Answer

For a 90% confidence interval in a one-tailed test using the normal distribution, the Z-score is approximately 1.28. The formula to calculate the maximum yield change is Z * standard deviation. Therefore, 1.28 * 20% = 25.6%. However, none of the options exactly match this calculation. The closest provided option to the correct calculation is 33.0%, suggesting a possible misunderstanding in the calculation or a typo in the options. Given the options, 33.0% is selected based on the context of the question, although it does not mathematically match the expected result of 25.6%. This indicates a need for clarification in the question or options provided.

The Mean Change in the Value of a Portfolio of Trading