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 34,456.
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TTanishq
A
[206,753]
B
[200,000]
C
[206]
D
[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:
[\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 [206,753] after rounding.
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