Frequency curves and Histogram
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For normal distribution with mean = 60 and standard deviation = 6, determine the probability content of the interval [62 to 67]
Question 2
The table below gives the deviation of a hypothetical portfolio's annual total return (gross of fees) from its benchmark's annual returns, for a 12-year period ending in 2003.
Portfolio's Deviation from benchmark return, 1992-2003
1992 -7.14%
1993 1.62%
1994 2.48%
1995 -2.59%
1996 9.37%
1997 -0.55%
1998 -0.89%
1999 -9.19%
2000 -5.11%
2001 -0.49%
2002 6.84%
2003 3.04%
(1) Calculate the frequency, cumulative frequency, relative frequency, and cumulative relative frequency for the portfolio's deviation from benchmark return, given the set of intervals in the table below
return interval frequency cumulative frequency relative frequency cumulative relative frequency
-9.19<A<-4.55
-4.55<B<0.09
0.09<C<4.73
4.73<D<9.37
(2) Construct a histogram using the data. Identify the modal interval of the grouped data. Tracking risk (also called tracking error) is the standard deviation of the deviation of a portfolio's gross-of-fees total returns from benchmark return. Calculate the tracking risk of the portfolio, stated in percent (give the answer to two decimal places).
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Solution Summary
The solution provides step by step method for the calculation of frequency, cumulative frequency, relative frequency, cumulative relative frequency distributions and normal probabilities. The solution also provides step by step method for constructing histogram. Formula for the calculation and Interpretations of the results are also included.
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Question 1
For normal distribution with mean = 60 and standard deviation = 6, determine the probability content of the interval [62 to 67]
Answer
Let X be the random variable with mean 60 and standard deviation 6. That is, X ~ N (60, 6)
P (62 < X < 67) = 0.2478
Normal Probabilities
Common Data
Mean 60
Standard Deviation 6
Probability for a Range
From X Value 62
To X Value 67
Z Value for 62 0.333333333
Z Value for 67 1.166666667
P(X<=62) 0.6306
P(X<=67) 0.8783
P(62<=X<=67) 0.2478
Question 2
The table below gives the deviation of a hypothetical portfolio's annual total return (gross of fees) from its benchmark's annual returns, for a 12-year period ending in 2003.
Portfolio's Deviation from ...
Purchase this Solution
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