The US Department of Transportation requires tire manufacturers to provide tire performance information on the sidewall of a tire to better inform prospective customers as they make purchasing decisions. One very importatnt measure of tire performance is the tread wear index, which indicates the tires resistance to tread wear compared with a tire graded with a base of 100. A tire wsith a grade of 200 should last twice as lon, on average, as a tire graded with a base of 100. A consumer organization wants to estimate the actual tread wear index of a brand name of tires that claims “graded 200” on the sidewall of the tire. A random sample of n=18 indicates a sample mean read wear index of 195.3 and a sample standard deviation of 21.4.a. assuming that the population of tread wear indexes is normally distributed, construct a 95% confidence interval estimate for the population mean tread wear index for tires produced by this manufacturer under this brand name.b. do you think that the consumer organization should accuse the manufacturer of producing tires that do not meet the performance information provided on the sidewall of the tire? Explain.c. explain why an observed tread wear index of 210 for a particular tire is not unusual, even though it is outside the confidence interval developed in a.

The US Department of Transportation requires tire manufacturers to provide tire performance information on the sidewall of a tire to better inform prospective customers as they make purchasing…

Write 6 page essay on the topic A central assumption made in Mean-Variance Analysis and the Capital Asset Pricing Model (CAPM) is that investors prefer to invest in the most efficient portfolios available.

An efficient portfolio is a collection of investments that provide the highest expected return at the given level of risk or portfolio that yield the lowest risk at given expected a return. Expected return is the minimum return expected by investors investing in any given asset. The risk occurs due to deviation from the expected return in either case as explained by Markowitz. According to Markowitz Portfolio Theory, individuals who accept to take high return with high-risk cannon diversify further without acceptance of greater risk. On the other hand, individuals will not agree to reduce their return without reduction of risk. This fact explains why low-risk, low-return and high-risk, high-return portfolios are equivalent when it comes to investing. Markowitz (1952: 77) believes that portfolio choice is dependent on maximum discounted risk venture which will give a high return since the future is uncertain and assurance of money back on investment should be assured.

The low-risk, low-return investors motivated by low risk in an asset they are investing in will invest more getting quantifiable income. On the other hand, high risk – high return individuals will tend to invest in minimal assets with high risk, but getting a quantifiable return due to their nature of the high return. As argued by Markowitz (1952, p, 77) investors should not just go for high return high-risk investment rather they should focus on the expected return. An investor may go for high-risk, high return bonds, but in case of failure, the return will be greatly reduced. On the other hand, an investor may go for several low-risk, low-return, but the cumulative expected return will be high (hypothesis of the maxim by Markowitz 1952: 78.).

According to maxim hypothesis, both diversified and under-diversified assert will have the same cumulative expected return. In the United States, the under-diversified portfolio is greater among young people,