#20 Finance: European Growth Fund A European growth mutual fund specializes in stock from British Isles, continental Europe, and Scandinavia. The fund has over 100 stocks. Let x be a random variable that represents the monthly percentage return for this fund. Based on information from Morningstar, x has a mean u = 1.4% and standard deviation o = 0.8%. (a) Let's consider the monthly return of the stocks in the European growth fund to be a sample from the population of monthly returns of all European stocks. Is it reasonable to assume that x (the average monthly return on the 100 stocks n the European fund) has a distribution that is approximately normal. (b) After 9 months, what is the probability that the average monthly percentage return I will be between 1% to 2%. (c) After 18 months, what is the probability that the average monthly percentage return x will be between 1% to 2%. (d) Compare your answers to parts (b) and (c). Did the probability increase as n (number of months) increase? Why would this happen? (e) If after 18 months the average monthly percentage return ī is more than 2%, would that tend to shake your confidence in the statement that u = 1.4%? If this happened, do you think the European stock market might be heating up? Explain.
#20 Finance: European Growth Fund A European growth mutual fund specializes in stock from British Isles, continental Europe, and Scandinavia. The fund has over 100 stocks. Let x be a random variable that represents the monthly percentage return for this fund. Based on information from Morningstar, x has a mean u = 1.4% and standard deviation o = 0.8%. (a) Let's consider the monthly return of the stocks in the European growth fund to be a sample from the population of monthly returns of all European stocks. Is it reasonable to assume that x (the average monthly return on the 100 stocks n the European fund) has a distribution that is approximately normal. (b) After 9 months, what is the probability that the average monthly percentage return I will be between 1% to 2%. (c) After 18 months, what is the probability that the average monthly percentage return x will be between 1% to 2%. (d) Compare your answers to parts (b) and (c). Did the probability increase as n (number of months) increase? Why would this happen? (e) If after 18 months the average monthly percentage return ī is more than 2%, would that tend to shake your confidence in the statement that u = 1.4%? If this happened, do you think the European stock market might be heating up? Explain.
MATLAB: An Introduction with Applications
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Author:Amos Gilat
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Transcribed Image Text:**#20 Finance: European Growth Fund**
A European growth mutual fund specializes in stock from the British Isles, continental Europe, and Scandinavia. The fund has over 100 stocks. Let \( x \) be a random variable that represents the monthly percentage return for this fund. Based on information from Morningstar, \( x \) has a mean \( \mu = 1.4\% \) and standard deviation \( \sigma = 0.8\% \).
**(a)** Let’s consider the monthly return of the stocks in the European growth fund to be a sample from the population of monthly returns of all European stocks. Is it reasonable to assume that \( x \) (the average monthly return on the 100 stocks in the European fund) has a distribution that is approximately normal.
**(b)** After 9 months, what is the probability that the average monthly percentage return \( \bar{x} \) will be between 1% to 2%?
**(c)** After 18 months, what is the probability that the average monthly percentage return \( \bar{x} \) will be between 1% to 2%?
**(d)** Compare your answers to parts (b) and (c). Did the probability increase as \( n \) (number of months) increase? Why would this happen?
**(e)** If after 18 months the average monthly percentage return \( \bar{x} \) is more than 2%, would that tend to shake your confidence in the statement that \( \mu = 1.4\% \)? If this happened, do you think the European stock market might be heating up? Explain.
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