Consider three stock funds, which we will call Stock Funds 1, 2,
and 3. Suppose that Stock Fund 1 has a mean yearly return of 11.70
percent with a standard deviation of 15.50 percent; Stock Fund 2
has a mean yearly return of 11.50 percent with a standard deviation
of 17.90 percent, and Stock Fund 3 has a mean yearly return of
25.70 percent with a standard deviation of 7.00 percent.
(a) For each fund, find an interval in
which you would expect 95.44 percent of all yearly returns to fall.
Assume returns are normally distributed. (Round your
answers to 2 decimal places. Negative amounts should be indicated
by a minus sign.)
Fund 1
Fund 2
Fund 3
(b) Using the intervals you computed in
part a, compare the three funds with respect to
average yearly returns and with respect to variability of
returns.
Fund 1 has the __________ average return and the ____________
variability
Fund 2 has the __________ average return and the
____________ variability
Fund 3 has the __________ average return and the
____________ variability