Question

Mutual fund AAAAX has an expected return of 15% and expected standard deviation of 25%. If...

Mutual fund AAAAX has an expected return of 15% and expected standard deviation of 25%. If the fund’s returns are normally distributed, what is the chance of losing money in any year on AAAAX? (10 points) (Show calculations in Excel.)

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Hello

YOUR REQUIRED ANSWER IS 0.2743

Given that:

Mean = 0.150
Standard Deviation = 0.250

Hence, we have to calculate the probability that in any given year, that the returns are less than 0.

Hence,

We can use the following function in excel to calculate the probability of normal distribution in excel:

=NORM.DIST(0,0.15,0.25,TRUE)

which comes out to be 0.2743

In the function,

0 stands for the value for which we have to calculate the probability

0.15 stands for mean return

0.25 stands for standard deviation

TRUE stands for the cumulation effect.

Thanks!

Please drop an upvote if you find this helpful.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A mutual fund has earned an annual average return of 15% over the last 5 years....
A mutual fund has earned an annual average return of 15% over the last 5 years. During that time, the average risk-free rate was 2% and the average market return was 12% per year. The correlation coefficient between the mutual fund’s and market’s returns was 0.7. The standard deviation of returns was 45% for the mutual fund and 22% for the market. What was the fund’s CAPM alpha?
A mutual fund has earned an annual average return of 15% over the last 5 years....
A mutual fund has earned an annual average return of 15% over the last 5 years. During that time, the average risk-free rate was 2% and the average market return was 12% per year. The correlation coefficient between the mutual fund’s and market’s returns was 0.7. The standard deviation of returns was 45% for the mutual fund and 22% for the market. What was the fund’s CAPM alpha?
A mutual fund has earned an annual average return of 15% over the last 5 years....
A mutual fund has earned an annual average return of 15% over the last 5 years. During that time, the average risk-free rate was 2% and the average market return was 12% per year. The correlation coefficient between the mutual fund’s and market’s returns was 0.7. The standard deviation of returns was 30% for the mutual fund and 22% for the market. What was the fund’s CAPM alpha?
A stock fund has an expected return of 15% and a standard deviation of 25% and...
A stock fund has an expected return of 15% and a standard deviation of 25% and a bond fund has an expected return of 10% and a standard deviation of 10%. The correlation between the two funds is 0.25. The risk free rate is 5%. What is the (a) expected return and (b) standard deviation of the portfolio with 70% weight in the stock portfolio and 30% weight in the bond portfolio?
A mutual fund has earned an annual average return of 15% over the last 5 years....
A mutual fund has earned an annual average return of 15% over the last 5 years. During that time, the average risk-free rate was 2% and the average market return was 12% per year. The correlation coefficient between the mutual fund’s and market’s returns was 0.7. The standard deviation of returns was 50% for the mutual fund and 22% for the market. What was the fund’s CAPM alpha? a) -2.9% b) -1.3% c) 0.3% d) 1.9% e) 3.5%
You manage a risky mutual fund with expected rate of return of 18% and standard deviation...
You manage a risky mutual fund with expected rate of return of 18% and standard deviation of 28%. The T-bill rate is 8%. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill. What is the expected value and standard deviation of the rate of return on his portfolio? Suppose that your risky mutual fund includes the following investments in the given proportions. What are the investment proportions of your client’s overall portfolio,...
The return on a mutual fund has a normal distribution with expected value of 15% and...
The return on a mutual fund has a normal distribution with expected value of 15% and standard deviation of 22%. The NAV of the mutual fund is $40. The fund is expected to distribute $2 in dividend to its shareholders one year from now. Calculate the probability that the NAV of the mutual fund a year from now (after the dividend distribution) will be between $50 and $60?
Q1) A stock fund has an expected return of 15% and a standard deviation of 25%...
Q1) A stock fund has an expected return of 15% and a standard deviation of 25% and a bond fund has an expected return of 10% and a standard deviation of 10%. The correlation between the two funds is 0.25. The risk free rate is 5%. What is the (a) expected return and (b) standard deviation of the portfolio with 70% weight in the stock portfolio and 30% weight in the bond portfolio? Q2) The variance of Stock A is...
1. Mutual fund A had an annual return of 10% and the annual standard deviation of...
1. Mutual fund A had an annual return of 10% and the annual standard deviation of its excess return is 30%. The average yield on Treasury bills during the same period is 3%. The excess return on mutual fund B had a standard deviation of 23%. What average return would give fund B the same Sharpe ratio as fund A? Enter your answer as a decimal (not percentage). 2. A stock has an annual return of 10% and a standard...
You are considering the risk-return of two mutual funds for investment. The relatively risky fund promises...
You are considering the risk-return of two mutual funds for investment. The relatively risky fund promises an expected return of 14.7% with a standard of 15.6%. The relatively less risky fund promises an expected return and standard deviation of 6.4% and 3.8%, respectively. Assume that the returns are approximately normally distributed. Using normal probability calculations and complete sentences, give your assessment of the likelihood of getting, on one hand, a negative return and on the other, a return above 10%...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT