
Explanation:
To construct a 90% two-sided confidence interval for a normally distributed parameter, we use the formula: Confidence Interval =
For a 90% confidence level, the significance level is 10%, meaning $5%5`%Z_{0.05}$) is approximately 1.645.
Given:
Calculating the bounds:
$0.3% - 1.645 \times 0.12% = 0.3% - 0.1974% = 0.1026%$$0.3% + 1.645 \times 0.12% = 0.3% + 0.1974% = 0.4974%$Rounding the bounds to three decimal places yields (0.103%, 0.497%).
Q.39 The CEO of AlphaTrynn Hedge Fund estimates that the effect of increasing the number of qualified financial analysts hired by one will improve the fund’s annual return by 0.3% with a standard error of 0.12%. Assuming the fund’s returns are normally distributed, which of the following best represents a 90% 2-sided confidence interval for the size of the slope coefficient?
A
(0.120%, 0.450%)
B
(0.270%, 0.610%)
C
(0.103%, 0.497%)
D
(0.299%, 0.300%)
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