Question

Here are the total returns for the S&P500 for the first ten years of this century. Assume you invested $1 in the S&P500 on January 1, 2001. Your first year's return was -11.85%.

Year Return

2001 -11.85%

2002 -21.97%

2003 28.36%

2004 10.74%

2005 4.83%

2006 15.61%

2007 5.48%

2008 -36.55%

2009 26.94%

2010 18.00% 4 points.

Q1. If you invested $1 at the beginning of the time frame [1/1/2001], how much would it be worth five years later? Show work and calculations. 4 points.

Q2. If you invested $1 at the beginning of the time frame [1/1/2001], how much would it be worth ten years later? Show work and calculations. 4 points.

Q3. What was the arithmetic return for the 10-year period? 4 points.

Q4. What was the standard deviation of returns for the 10-year period? 2 points.

Q5. What was the variance of returns for the 10-year period. 2 points.

Q6. If you assumed returns were "normally distributed", what range of returns would you expect for a given year?

Answer 1