contestada

"you are considering investing in a mutual fund. the fund is expected to earn a return of 15 percent in the next year. if its annual return is normally distributed with a standard deviation of 5.20 percent, what return can you expect the fund to beat 95 percent of the time?

Respuesta :

The return can you expect the fund to beat 95 percent of the time lies between 4.81% and 25.19%

What does standard deviation of 5.20% mean?

The standard deviation of 5.20% means that the expected return can either by higher or lower by 5.20%

What does 95% of time correlates to in Z value?

95 percent of the time from the Z value implies 1.96, in other words, how expected return the fund is likely to beat 95% of time is expressed using the formula below:

Expected return of the mutual fund = Average return ± [Z value× Standard deviation]  

Average return=15%

Z value=1.96

standard deviation=5.20%

Expected return of the mutual fund =15%±(1.96*5.20%)

Expected return of the mutual fund =15%±10.19%

Expected return of the mutual fund =15%+10.19%

Expected return of the mutual fund =25.19%(positive sign)

Expected return of the mutual fund =4.81%(negative sign)

Note that the final answers are rounded to 2 decimal places based on industry practices.

Find out more expected return relating with standard deviation on:https://brainly.com/question/18805225

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