In: Statistics and Probability
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 8.00 percent with a standard deviation of 16.30 percent; Stock Fund 2 has a mean yearly return of 11.40 percent with a standard deviation of 18.80 percent, and Stock Fund 3 has a mean yearly return of 13.10 percent with a standard deviation of 8.90 percent.
(a) For each fund, find an interval in which you would expect 95.44 percent of all yearly returns to fall. Assume returns are normally distributed. (Round your answers to 2 decimal places. Negative amounts should be indicated by a minus 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 (Click to select) lowest middle highest average and the (Click to select) middle smallest highest variability. |
Fund 2 has the (Click to select) lowest middle highest average and the (Click to select) middle highest smallest variability. |
Fund 3 has the (Click to select) middle lowest highest average return and the (Click to select) smallest highest middle variability. |
(c) Calculate the coefficient of variation for
each fund, and use your results to compare the funds with respect
to risk. Which fund is riskiest? (Round your answers to 2
decimal places. Omit the "%" sign in your response.)
Fund 1: | Coefficient of Variation = % |
Fund 2: | Coefficient of Variation = % |
Fund 3: | Coefficient of Variation = % |
Fund 1 is (Click to select) second
riskiest least risky riskiest ,
Fund 2 is (Click to select) least
risky riskiest second riskiest and
Fund 3 is (Click to
select) riskiest second
riskiest least risky .