Consider three stock funds, which we will call Stock Funds 1, 2, and 3. Suppose
ID: 3039943 • Letter: C
Question
Consider three stock funds, which we will call Stock Funds 1, 2, and 3. Suppose that Stock Fund 1 has a mean yearly return of 16.60 percent with a standard deviation of 11.40 percent, Slock Fund 2 has a mean yearly return of 11 standard deviation of 10.90 percent, and Stock Fund 3 has a mean yearnly return of 27.50 percent with a standard deviation of 14.60 percent (a) For each fund, find an interval in which you would expect 95.44 percent of all yearly returns to fall Assume retums are normally distributed. (Round your answers to 2 decimal places. Negative amounts should be indicat sign.) Fund 1 Fund 2 Fund 3: (b) Using the intervals you computed in part a, compare the three funds with respect to average yearly returns and with respect to variability of returns. Fund 1 has the middle Fund 2 has the lowest Fund 3 has the high average and the middle average and the smallest average return and the variability v variability est (c) Calculate the coefficient of variation for each fund, and use your resuits to compare the funds with respect to risk which fund is nskiest? (Round your answers to 2 decimal places. Omit the "%" sign in your response.) Fund 1 Fund 2 Fund 3 Coefficient of Variation = Coefficient of Variation = Coefficient of Variation = Fund 1 is second riskiest Fund 2 is second riskiest and Fund 3 is least riskExplanation / Answer
Answer:
a).
95.44 interval is (mean-2sd, mean+2sd)
Fund1
-6.20
39.40
Fund2
-10.80
32.80
Fund3
-1.70
56.70
b).
Fund 1 is middle average and middle variability.
Fund 2 is least average and smallest variability
Fund 3 is highest average and highest variability
c).
coefficient of variation = (sd/mean)*100
Fund1
68.67
Fund2
99.09
Fund3
53.09
Fund 1 is second riskiest, Fund 2 is high riskiest, Fund3 is least riskiest.
Fund1
-6.20
39.40
Fund2
-10.80
32.80
Fund3
-1.70
56.70