Explanation:
The expected value of the sample mean will be 7%. The sample mean return will have variance equal to $0.04 / 20 = 0.002\frac{\sqrt{0.04}}{\sqrt{20}} = 4.472%0.07\pm 1.96(0.04472)$, or $-1.77\%$ to.
(Book 2, Module 17.1, LO 17.d)
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Question 63
For the last year, the returns on stocks in an index were approximately normally distributed with a mean of 7% and a variance of 0.04. There is a 95% probability that randomly selected portfolios of 20 of these index stocks will have mean returns for the last year between:
A
0.8% and 14.8%.
B
−1.8% and 15.8%.
C
−0.4% and 14.4%.
D
−1.8% and 14.8%.
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