Financial Risk Manager Part 1

Financial Risk Manager Part 1

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Construct a 95% confidence interval for the ending mutual fund capital amount where the number of simulations is 100, the mean ending capital is 200,000,andthestandarddeviationis200,000, and the standard deviation is 34,456.

TTanishq

Explanation:

We need to find the 2.5th percentile and the 97.5th percentile for the z-distribution with 100 observations. The formula to apply is:

[\bar{X} - 1.96 * (\frac{s}{\sqrt{N}}), \bar{X} + 1.96 * (\frac{s}{\sqrt{N}})]

Where ( N = 100 )

[= $200,000 - 1.96(\frac{$34,456}{\sqrt{100}}), $200,000 + 1.96(\frac{$34,456}{\sqrt{100}})] [= [$193,246.624, $206,753.376]]

This matches option A [193,247,193,247, 206,753] after rounding.

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