You do not need a lot of money to invest in a mutual fund. However, if you decide to put some money into an investment, you are usually advised to leave it in for (at least) several years. Why? Because good years tend to cancel out bad years, giving you a better overall return with less risk. To see what we mean, let's use a 3-year moving average on the Calvert Social Balanced Fund (a socially responsible fund). Year 1 2 3 4 5 6 7 8 9 10 11 % Return 1.78 17.79 7.46 5.95 −4.74 25.85 9.03 18.92 17.49 6.80 −2.38 (a) Use a calculator with mean and standard deviation keys to find the mean and standard deviation of the annual return for all 11 years. (Round your answers to two decimal places.) x = % s = % (b) To compute a 3-year moving average for 1992, we take the data values for year 3 and the prior 2 years and average them. To compute a 3-year moving average for year 4, we take the data values for year 4 and the prior 2 years and average them. Verify that the following 3-year moving averages are correct. Year 3 4 5 6 7 8 9 10 11 3-year moving average 9.01 10.40 2.89 9.02 10.05 17.93 15.15 14.40 7.30 (c) Use a calculator with mean and standard deviation keys to find the mean and standard deviation of the 3-year moving average. (Round your answers to two decimal places.) x = % s = %

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Author:Amos Gilat
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You do not need a lot of money to invest in a mutual fund. However, if you decide to put some money into an investment, you are usually advised to leave it in for (at least) several years. Why? Because good years tend to cancel out bad years, giving you a better overall return with less risk. To see what we mean, let's use a 3-year moving average on the Calvert Social Balanced Fund (a socially responsible fund).

Year 1 2 3 4 5 6 7 8 9 10 11
% Return 1.78 17.79 7.46 5.95 −4.74 25.85 9.03 18.92 17.49 6.80 −2.38
 
(a) Use a calculator with mean and standard deviation keys to find the mean and standard deviation of the annual return for all 11 years. (Round your answers to two decimal places.)
x =  %
s =  %

(b) To compute a 3-year moving average for 1992, we take the data values for year 3 and the prior 2 years and average them. To compute a 3-year moving average for year 4, we take the data values for year 4 and the prior 2 years and average them. Verify that the following 3-year moving averages are correct.
Year 3 4 5 6 7 8 9 10 11
3-year moving average 9.01 10.40 2.89 9.02 10.05 17.93 15.15 14.40 7.30
(c) Use a calculator with mean and standard deviation keys to find the mean and standard deviation of the 3-year moving average. (Round your answers to two decimal places.)
x =  %
s =  %
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