You are considering investing in a mutual fund

Finance Dec 22, 2020

You are considering investing in a mutual fund. The fund is expected to earn a return of 18.2 percent in the next year. If its annual return is normally distributed with a standard deviation of 23.1 percent, what return can you expect the fund to beat 95 percent of the time? (Note: Write your answer as decimals with three decimal places. For example, if you answer is 8.7%, you should write 0.087 in the answer box. DO NOT write 8.7 in the box as you will be marked wrong).

Expert Solution

expected return of the fund 95% of the time = mean - z*standard deviation

where z is the 95%ile

expected return of the fund 95% of the time = 18.2% - 1.645*23.1% = -19.80%

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