Question

"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? (Round answer to 2 decimal places, e.g. 52.75%.)"

Answer 1

Answer:

Expected return = 4.808% to 25.192%

Explanation:

Given:

Average rate of return = 15%  

Standard deviation = 5.20%

At 95% Z value = 1.96

Find:

Expected return

Computation:

Expected return = Average return ± [Z× Standard deviation]                     Expected return  = 15% ± [1.96 × 5.20%]

Expected return = 15% - 10.192% and 15% + 10.192%

Expected return = 4.808% to 25.192%