Refer to given Exercise. The investment bank was able to identify a riskier strategy that projects a mean yield of 9.2% with a standard deviation of 2.4%. Assuming normality of distribution of yield rates, what is the lower capability index now if a target goal of 9% is set? In what proportion of the time will the goal be met? Would you prefer this strategy relative to the strategy in Exercise?
Exercise
An investment bank has been monitoring its return on investment for a certain category of its shareholders. Past data show a mean yield of 7.5% with a standard deviation of 1.5%. Assuming normality of distribution of yield rates, if senior management has set a goal of 9% for yield, what is the lower capability index? In what proportion of the time will the goal be met?