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Answer: 2.4%
Explanation C is correct. In order to calculate the standard deviation of the mean weekly returns, we must divide the standard deviation of the return series by the square root of the sample size. Therefore, the correct answer is 17%/sqrt(50) = 2.4%.
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A risk manager is tasked with calculating the Value at Risk (VaR) for an investment fund. To do so, they use a dataset consisting of 50 weekly returns. From this data, they determine that the mean weekly return is 8% and the standard deviation of these returns is 17%. Assuming that the weekly returns are independent and identically distributed, calculate the standard deviation of the average weekly return for the fund.
A
0.4%
B
0.7%
C
2.4%
D
10.0%
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