The mean change in the value of a portfolio of trading assets has been estimated to be 0 with a standard deviation of 20 percent. Yield changes are assumed to be normally distributed.
-What is the maximum yield change expected if a 90 percent confidence (one-tailed) limit is used?

Question

Quizplus · Accepted Answer

For a 90% confidence level in a one-tailed test, the z-score is approximately 1.28. The maximum yield change is calculated as the mean plus the z-score times the standard deviation: 0 + 1.28 * 20% = 25.6%. However, the closest option to this calculation is 33.0%, which suggests a rounding or approximation in the options provided.

The Mean Change in the Value of a Portfolio of Trading