Question

The annual return on an S&P 500 index mutual fund over the next 40 years has...

The annual return on an S&P 500 index mutual fund over the next 40 years has a normal distribution

with expected value of 10% and standard deviation of 22%. What is the expected ending value of

$10,000 invested in the mutual fund? What would happen to the expected terminal wealth if the

standard deviation were 30%? (show answer in excel)

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Rate Mean Return 10%
Nper Number of years 40
Pv Investment $10,000
FV Expected Terminal Wealth $452,593 (Using FV function of excel withRate=10%, Nper=40, Pv=-10000)
Excel command: FV(10%,40,,-10000)
If the standard deviation changes, the expected terminal wealth will remain the same
But the Variation of terminal wealth will increase with increase in Standard Deviation
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
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?
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 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%
The annual return of a well-known mutual fund has historically had a mean of about 10%...
The annual return of a well-known mutual fund has historically had a mean of about 10% and a standard deviation of 39%. Suppose the return for the following year follows a normal distribution, with the historical mean and standard deviation. a. What is the probability that you will lose money in the next year by investing in this fund? b. What is the probability that you will earn at least 25% in the next year?
S&P 500 Please pick one ETF or Mutual Fund that tracks the Standard and Poor 500...
S&P 500 Please pick one ETF or Mutual Fund that tracks the Standard and Poor 500 Index.             What is the name of the fund? Describe its profile             List its top 10 holdings What is its 10-year historical return?             How diversified is it by sectors of the economy? Meaning describe or give the percentage of how much of the fund is invested in each of the sectors of our economy.)
You have the option to invest in an S&P 500 Index fund that guarantees the average...
You have the option to invest in an S&P 500 Index fund that guarantees the average performance of stocks in the index. Assume that exactly 500 companies are in the economy and thus beta for this index fund is equal to 1, while the expected return of this index fund is 20%. An alternative risk-free asset has a return rate of 10%. Using the straight-line tool, draw the market line that plots the relationship between expected returns and beta. Consider...
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...
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.)
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT