Examining a stock for possible inclusion

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Reference no: EM131807395

Question: A research analyst is examining a stock for possible inclusion in his client's portfolio. Over a 10-year period, the sample mean and the sample standard deviation of annual returns on the stock were 20% and 15%, respectively. The client w ants to know if the risk, as measured by the standard deviation, differs from 18%.

a. Construct a 95% confidence interval of the population variance and then infer the 95% confidence interval of the population standard deviation.

b. What assumption did you make in constructing the confidence interval?

c. Based on the above confidence interval, does the risk differ from 18%?

Reference no: EM131807395

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