Question

In 2011-2015, mutual fund manager, Diana Sauros produced the following percentage rates of return for the Mesozoic Fund. Rates of return on the market index are given for comparison.

	2011	2012	2013	2014	2015
Fund	?1.4	+24.3	+40.3	+11.3	+0.5
Market index	?0.8	+15.0	+31.3	+10.6	?0.6

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.)

	Mesozoic Fund Return	Market Portfolio Return
Average Return
Standard Deviation

Answer 1

To calculate the average of the given data, we’ll use the formula as below:

Average = Sum of all observations / total number of observations

To compute the standard deviation of the given data, we’ll use the following steps:

1. Write all the data (x values) in tabular format and find its average (xbar) using the formula above.

2. Find the difference of each value (x) with the average (xbar).

3. Compute the square of each (x-xbar) value thus generated. Find the sum of all values.

4. Compute variance using the formula as – sum/(n-1), where n= no of observations

5. Compute the standard deviation by taking the square root of variance computed above.

All the values pertaining to the question have been described below.