Refer to Exercise 9-42. 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 9-42?

Exercise 9-42

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?