Much is made of the fact that certain mutual funds outperform the market year after year
3 Much is made of the fact that certain mutual funds outperform the market year after year (that is, the. return from holding shares in the mutual fund is higher than the return from holding a portfolio such as the S\&P 500). For concreteness, consider a 10-year period and let the population be the 4,170 mutual funds reported in The Wall Street Journal on January 1, 1995. By saying that performance relative to the market is random, we mean that each fund has a 50-50 chance of outperforming the market in any year and that performance is independent from year to year.
(i) If performance relative to the market is truly random, what is the probability that any particular fund outperforms the market in all 10 years?
(ii) Of the 4,170 mutual funds, what is the expected number of funds that will outperform the market in all 10 years?
(iii) Find the probability that at least one fund out of 4,170 funds outperforms the market in all 10 years. What do you make of your answer?
(iv) If you have a statistical package that computes binomial probabilities, find the probability that at least five funds outperform the market in all 10 years.
[8 pts] Do problem 3 from Wooldridge Appendix B (HINT: for the last part use the following online binomial probability calculator and input the correct number of trials, input your answer from the first part for the success probability, and input 4 for the endpoint. The software will then output the probability of at least 5 funds outperforming the market.
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Much is made of the fact that certain mutual funds outperform the market year after year
You are provided with information on mutual fund performance. All Funds have an investment objective of...
You are provided with information on mutual fund performance. All Funds have an investment objective of outperforming the S&P 500 Index (symbol: SPX). None of the MFs distribute dividends to their investors. [Table 2] Mutual Fund Performance (Year 2019: 12/31/2018-12/31/2019) Average number of stocks in 2019 Price as of 12/31/2018 Price as of 12/31/2019 Annual risk (stdev) market risk () MF A 500 100 128 30% 1.00 MF B 125 100 130 30% 1.05 MF C 12 100 100 40%...
Question 10 (3 points) Active mutual funds historically outperform passive mutual funds. Question 10 options: a)...
Question 10 (3 points) Active mutual funds historically outperform passive mutual funds. Question 10 options: a) True b) False The NASDAQ: Question 5 options: a) weights individual stocks equally. b) gives greater weight to larger stocks than does the Dow. c) gives greater weight to high-tech stocks than does the Dow. d) has 30 stocks. Popular U.S. stock indexes include: I. FDIC II. Dow Jones Industrial Average III. NASDAQ Question 15 options: a) I and II only b) I and...
QUESTION 2 A probability distribution has a mean of 57 and a standard deviation of 1.4. Use Cheby...
QUESTION 2 A probability distribution has a mean of 57 and a standard deviation of 1.4. Use Chebychev's inequality to find the value of c that guarantees the probability is at least 96% that an outcome of the experiment lies between 57- c and 57-c. (Round the answer to nearest whole number.) a. e. 9 Cliek Save and Submit to saue and submit. Click Save All Answers to save all answers. Save All Ar QUESTION 3 Find the variance of...
ANSWER ALL. fiund is considering three mutual funds. The first is a stock fund, the second is money market fund yielding 1%. The probability a bond fund, and the third is a Exsciod Retcn 10% 5% 12...
ANSWER ALL.
fiund is considering three mutual funds. The first is a stock fund, the second is money market fund yielding 1%. The probability a bond fund, and the third is a Exsciod Retcn 10% 5% 12% Stock Fund (S) Bond Fund (B) The correlation between the fund returns is 0.10 (ie. negative). 30. Calculate the wcights on socks (mu) and bonds (m) associated with the Minimum b, (w-74% , w -26%) d. (we-28%, w-72%) the expected return for a...
We were unable to transcribe this imageBledsoe Small-Cap Fund This fund primarily invests in small-capitalization stocks....
We were unable to transcribe this imageBledsoe Small-Cap Fund This fund primarily invests in small-capitalization stocks. As such, the returns of the fund are more volatile. The fund can also invest 10 percent of its assets in companies based outside the United States. This fund charges 1.70 percent in expenses. Bledsoe Large-Company Stock Fund This fund invests primarily in large- capitalization stocks of companies based in the United States. The fund is managed by Evan Bledsoe and has outperformed the...
A certain mutual fund invests in both U.S. and foreign markets. Let x be a random...
A certain mutual fund invests in both U.S. and foreign markets. Let x be a random variable that represents the monthly percentage return for the fund. Assume x has mean μ = 1.9% and standard deviation σ = 0.7%. (a) The fund has over 250 stocks that combine together to give the overall monthly percentage return x. We can consider the monthly return of the stocks in the fund to be a sample from the population of monthly returns of...
objective risk excepr: O All fthe following are methods used by ingurance are methods used by...
objective risk excepr: O All fthe following are methods used by ingurance are methods used by insurance companies to A. safety education programs. C. investment in investment grade securities only D. use of deductibles. selective underwriting of insureds of: 7. A life insurance company needs more liquidity when selling a high proportion A. one-year renewable term policies B. annuities. C, thirty-year term policies D. whole life policies. one of the following statements about universal life insurance is not true? A....
Jennifer is interested in the mutual fund RBC U.S. Index Fund – Series A. She has...
Jennifer is interested in the mutual fund RBC U.S.
Index Fund – Series A. She has a few questions for
you before she buys this investment.
a) Does the reported fund’s return include the Management
Expense Ratio (MER) ? Yes or No
b) What type of fee is charged: No-load, Front-end load or a
Back-end load?
c) Is the status of this mutual fund classified as a closed-end
or open-end mutual fund?
d) Based on your response in c), explain...
I need help calculating all kf these questions. Really stuck on all of them! Thank you!...
I need help calculating all kf these questions. Really stuck
on all of them! Thank you!
Year using the returns for the first three years. The next rolling ace would be calculated using the returns from Years 2. 3. and 4, and so on Using the annual returns for large company stocks and Treasury bills, calculate both the 5- and 10-year rolling average return and standard deviation. h Over how many 5-year periods did Treasury bills outreform Caree company stocks?...
PART III Risk A JOB AT EAST COAST YACHTS You recently graduated from college and your...
PART III Risk A JOB AT EAST COAST YACHTS You recently graduated from college and your job search led you to East Coast Yachts. Became you felt the company's business was seaworthy, you accepted a job offer. The first day on the job, while you are finishing your employment paperwork, Dan Ervin, who works in Finance stops by to inform you about the company's 401(k) plan. A 401(k) plan is a retirement plan offered by many companies. Such plans are...
QUESTION 2 A probability distribution has a mean of 57 and a standard deviation of 1.4. Use Chebychev's inequality to find the value of c that guarantees the probability is at least 96% that an outcome of the experiment lies between 57- c and 57-c. (Round the answer to nearest whole number.) a. e. 9 Cliek Save and Submit to saue and submit. Click Save All Answers to save all answers. Save All Ar QUESTION 3 Find the variance of...
ANSWER ALL.
fiund is considering three mutual funds. The first is a stock fund, the second is money market fund yielding 1%. The probability a bond fund, and the third is a Exsciod Retcn 10% 5% 12% Stock Fund (S) Bond Fund (B) The correlation between the fund returns is 0.10 (ie. negative). 30. Calculate the wcights on socks (mu) and bonds (m) associated with the Minimum b, (w-74% , w -26%) d. (we-28%, w-72%) the expected return for a...
We were unable to transcribe this imageBledsoe Small-Cap Fund This fund primarily invests in small-capitalization stocks. As such, the returns of the fund are more volatile. The fund can also invest 10 percent of its assets in companies based outside the United States. This fund charges 1.70 percent in expenses. Bledsoe Large-Company Stock Fund This fund invests primarily in large- capitalization stocks of companies based in the United States. The fund is managed by Evan Bledsoe and has outperformed the...
objective risk excepr: O All fthe following are methods used by ingurance are methods used by insurance companies to A. safety education programs. C. investment in investment grade securities only D. use of deductibles. selective underwriting of insureds of: 7. A life insurance company needs more liquidity when selling a high proportion A. one-year renewable term policies B. annuities. C, thirty-year term policies D. whole life policies. one of the following statements about universal life insurance is not true? A....
Jennifer is interested in the mutual fund RBC U.S.
Index Fund – Series A. She has a few questions for
you before she buys this investment.
a) Does the reported fund’s return include the Management
Expense Ratio (MER) ? Yes or No
b) What type of fee is charged: No-load, Front-end load or a
Back-end load?
c) Is the status of this mutual fund classified as a closed-end
or open-end mutual fund?
d) Based on your response in c), explain...
I need help calculating all kf these questions. Really stuck
on all of them! Thank you!
Year using the returns for the first three years. The next rolling ace would be calculated using the returns from Years 2. 3. and 4, and so on Using the annual returns for large company stocks and Treasury bills, calculate both the 5- and 10-year rolling average return and standard deviation. h Over how many 5-year periods did Treasury bills outreform Caree company stocks?...
PART III Risk A JOB AT EAST COAST YACHTS You recently graduated from college and your job search led you to East Coast Yachts. Became you felt the company's business was seaworthy, you accepted a job offer. The first day on the job, while you are finishing your employment paperwork, Dan Ervin, who works in Finance stops by to inform you about the company's 401(k) plan. A 401(k) plan is a retirement plan offered by many companies. Such plans are...
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