PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337117005
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Question
Chapter 13, Problem 8FPE
Summary Introduction
To determine: Mutual fund approximate
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Consider a no-load mutual fund with $457 million in assets and 12 million shares at the start of the year, and $520 million in assets and 13.21 million shares at the end of the year. During the year investors have received income distributions of $2.25 per share, and capital gains distributions of $1.57 per share. Assume that the fund carries no debt.
What is the rate of return on the fund?
Group of answer choices
15.33%
13.03%
13.39%
12.31%
11.42%
If you desire to forecast performance of a mutual fund for next year, the best forecast will be given by the
a. geometric average return
b. neither geometric average return nor arithmetic average return
c. arithmetic average return
d. both geometric average return and arithmetic average return
You buy and hold a S&P 500 index fund. You always reinvest your dividends earned on the fund. Which method provides the best measure of the actual average historical performance of the investments you have chosen?
a. both geometric average return and arithmetic average return
b. neither geometric average return nor arithmetic average return
c. arithmetic average return
d. geometric average return
Consider a no - load mutual fund with $ 500 million in assets , 50 million in debt , and 12 million shares at the start of the year , and $ 600 million in assets , 40 million in debt , and 16 million shares at the end of the year . During the year investors have received income distributions of $ 0.50 per share , and capital gains distributions of $ 0.40 per share . Assuming that the fund carries no debt , and that the total expense ratio is 0.90 % , what is the rate of return on the fund ?
Chapter 13 Solutions
PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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- Suppose that you initially invested 10,000 in the Stivers mutual fund and 5,000 in the Trippi mutual fund. The value of each investment at the end of each subsequent year is provided in the table: Which of the two mutual funds performed better over this time period?arrow_forwardThe file MutualFunds contains a data set with information for 45 mutual funds that are part of the Morningstar Funds 500. The data set includes the following five variables: Fund Type: The type of fund, labeled DE (Domestic Equity), IE (International Equity), and FI (Fixed Income) Net Asset Value (): The closing price per share Five-Year Average Return (%): The average annual return for the fund over the past five years Expense Ratio (%): The percentage of assets deducted each fiscal year for fund expenses Morningstar Rank: The risk adjusted star rating for each fund; Morningstar ranks go from a low of 1 Star to a high of 5 Stars. a. Prepare a PivotTable that gives the frequency count of the data by Fund Type (rows) and the five-year average annual return (columns). Use classes of 09.99, 1019.99, 2029.99, 3039.99, 4049.99, and 5059.99 for the Five-Year Average Return (%). b. What conclusions can you draw about the fund type and the average return over the past five years?arrow_forwardSuppose that the return for a particular large-cap stock fund is normally distributed with a mean of 14.4% and standard deviation of 4.4%. a. What is the probability that the large-cap stock fund has a return of at least 20%? b. What is the probability that the large-cap stock fund has a return of 10% or less?arrow_forward
- An investor wants to select one of the following mutual funds for the coming year. Data showing the percentage annual return for each fund during five typical one-year periods are shown below. The assumption is that one of these five year periods will occur again during the coming year. Thus A, B, C, D and E are states of nature for the mutual fund decision. Outcomes Mutual Fund Year A Year B Year C Year D Year E Large Cap Stock 25.3 30.0 48.3 22.4 -19.8 Mid-Cap Stock 35.9 21.6 -9.9 62.3 -20.1 Small-Cap Stock 40.5 29.4 16.0 13.8 6.1 Energy Sector 35.4 23.2 -19.5 31.4 -12.2 Health Sector 49.1 5.5 89.5 70.4 -20.5 Tech Sector 46.2 37.2 46.9 40.5 -16.2 Real Estate Sector 18.9 35.0 -20.0 24.6 13.2 a) Assume the investor is conservative, what is the recommended fund?…arrow_forwardConsider a no-load mutual fund with $200 million in assets and 11 million shares at the start of the year, and $410 million in assets and 14 million shares at the end of the year. Investors have received income distributions of $4 per share, and capital gains distributions of $0.70 per share. Assuming that the fund carries no debt, and that the total expense ratio is 1%, what is the rate of return on the fund? Multiple Choice O. 85.31% O 33.61% O. 70.00% O. There is not sufficient information to answer this questionarrow_forwardA pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 5.4%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (S) 15% 44% Bond fund (B) 8 38 The correlation between the fund returns is 0.15.Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places. Omit the "%" sign in your response.)arrow_forward
- A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 5.5%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (S) 16% 32% Bond fund (B) 10 23 The correlation between the fund returns is 0.20. Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) portfolio invested in the stock portfolio invested in the bond expected return standard deviationarrow_forwardA pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 4.5%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 15% 40% Bond fund (B) 9% 31% The correlation between the fund returns is 0.15. Required: Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.)arrow_forwardI need someone to check my answer In a recent 5-year period, 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 Year Fund Return (%) Standard deviation mean Deviation 2 Market index return (%) Standard Deviation (Mean) Deviation2 1 -1.4 -16.52 272.91 -0.5 -11.8 139.24 2 24.0 8.88 77.44 16.0 4.7 22.09 3 41.9 26.78 717.17 31.4 20.1 404.01 4 10.9 -4.22 17.81 9.9 -1.4 1.96 5 0.2 -14.92 222.61 -0.3 -11.6 134.56 TOTAL 75.6 1,307.94 56.5 701.86 AVERAGE 15.12 261.59 11.3 140.37 SD 16.17 11.85 Calculate The average return on Mesozoic Fund Return and Market Portfolio Return Fund return = (-1.4+24+41.9+10.9+0.2)/5 = 15.12 Market index return = -0.5+16+31.4+9.9+ (-0.3)]/5 =…arrow_forward
- A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 8%. The probability distribution of the risky funds is as follows: Expected return Standard Deviation Stock fund 20% 30% Bond Fund 12 15 The correlation between the fund returns is 0.10. Tabulate the investment opportunity set of the two risky funds. (Round your answers to 2 decimal places.) Proportion in Stock fund Proportion in bond fund Expexted return Standard deviation 0% 100% 20% 80% 40% 60% 60% 40% 80% 20% 100% 0%arrow_forwardA pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 8%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (s) 20% 30% Bond fund (b) 12 15 The correlation between the fund returns is .10.Tabulate and draw the investment opportunity set of the two risky funds. Use investment proportions for the stock fund of 0% to 100% in increments of 20%.arrow_forwardA pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 17% 32% Bond fund (B) 11% 23% The correlation between the fund returns is 0.25. Required: Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.) Portfolio Invested in Stock ____ % Portfolio Invested in the bond ____% Expected Return ____% Standard Deviation ___%arrow_forward
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