Statement of a problem № m40680


An investor with a substantial stock portfolio sued her broker and brokerage firm because lack of diversification in her portfolio led to poor performance. The rates of return for the 39 months that the account was managed by the broker produced these summary statistics:  = -1.10%, S = 5.99%. Consider the 39 monthly returns as a random sample from the population of returns the brokerage would generate if it managed the account forever. Using the sample results, construct a 95% confidence interval for the mean monthly market return. Let the S&P 500 represent the market, and suppose the mean S&P 500 return for the same period is 0.94%. Is this a realistic value for the population mean of the client s account? Explain.

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