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, and the standard deviation is $34,456.
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TTanishq
A
[$193,247, $206,753]
B
[$193,177.7, $200,000]
C
[$193, $206]
D
[$180,000, $220,000]
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:
Where
= \`$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, $206,753] after rounding.
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