Question

Sad Help Check my work mode: This shows what is correct or incorrect for the work you have completed so far. It does not indicate com In 2011-2015, mutual fund manager, Diana Sauros produced the following percentage rates of return for the Mesozoic Fund. Rate return on the market index are given for comparison Fund Market index 2011 2012 2013 2014 2015 -1.2 +24.8+40.7+11.1 +0.3 -0.9 +16.0+31.7+10.9 -0.7 a. Calculate (a) the average return on both the Fund and the index, and (b) the standard deviation of the returns on each. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Answer is complete but not entirely correct. Mesozoic Fund Return Market Portfolio Return 14 943 1160 Average return Standard deviation 15.97 1199 < Prev 13 of 17 8 Next >

Answer 1

Average Return =

ΣΧ/Ν

where $\sum X$    = total of returns of each year

N= number of years

Year 2011 2012 2013 2014 2015 Total Fund(f) Market index(m) -1.2 -0.9 24.8 16 40.7 31.7 11.1 10.9 0.3 -0.7 75.7 57 (f-f")^2 275.56 88.36 640.09 18.49 228.01 1250.51 (m-m')^2 151.29 21.16 412.09 0.25 146.41 731.2

from the above information

Average return of fund = 75.7 / 5 =15.14

Market portfolio return = 57 / 5 = 11.4

Standard Deviation =

VE(X – X')?/N

where X = Yearly return

X' = average return

N = number of years

Standard deviation of Fund = (1250.51 / 5)^1/2 = 15.81

Standard deviation of market portfolio = (731.2 / 5)^1/2 = 12.09

(note:there may be difference in decimals which can be ignored)