Morningstar tracks the total return for a large number of mutual funds. The following tableshows the total return and the number of funds for four categories of mutual funds
(Morningstar Funds500, 2008).
Type of Fund
Domestic Equity
International Equity
Specialty Stock
Hybrid Number of Funds
9191
2621
1419
2900
Total Return (%)
4.65
18.15
11.36
6.75
a. Using the number of funds as weights, compute the weighted average total return for
the mutual funds covered by Morningstar.
b. Is there any difficulty associated with using the "number of funds" as the weights in
computing the weighted average total return for Morningstar in part (a)? Discuss. What
else might be used for weights?
c. Suppose you had invested $10,000 in mutual funds at the beginning of 2007 and
diversified the investment by placing $2000 in Domestic Equity funds, $4000 in International Equity funds, $3000 in Specialty Stock funds, and $1000 in Hybrid
funds. What is the expected return on the portfolio?

Answers

Answer 1

Answer:

a. The weighted average total return for the mutual funds covered by Morningstar is 7.81%.

b. A better weight would be the total amount of money invested in each category.

c. The expected return on the portfolio is 12.273%.

a. To compute the weighted average total return for the mutual funds covered by Morningstar, we need to multiply the total return for each category by the number of funds in that category, sum the products, and divide by the total number of funds:

Weighted average total return = [(4.65 x 9191) + (18.15 x 2621) + (11.36 x 1419) + (6.75 x 2900)] / (9191 + 2621 + 1419 + 2900)

Weighted average total return = 7.81%

Therefore, the weighted average total return for the mutual funds covered by Morningstar is 7.81%.

b. Using the "number of funds" as weights in computing the weighted average total return for Morningstar may not be appropriate if the funds in each category have different sizes or investment amounts. In this case, a better weight would be the total amount of money invested in each category. Another possible weight could be the market capitalization of the companies in which the funds are invested.

c. To find the expected return on the portfolio, we need to multiply the amount invested in each category by the expected return for that category, sum the products, and divide by the total amount invested:

Expected return = [(0.2 x 4.65) + (0.4 x 18.15) + (0.3 x 11.36) + (0.1 x 6.75)] / (2000 + 4000 + 3000 + 1000)

Expected return = 12.273%

Therefore, the expected return on the portfolio is 12.273%.

To learn more about weighted averages;

brainly.com/question/35145315

#SPJ12

Related Questions

Jan raised $120.75 at the car wash. If each wash costs $5.75, how many cars did she wash?
If f(x) = 2x – 5 and g(x) = x +4, then f(g(2)) =
- Use the unit circle to evaluate the six trigonometric functions of theta= 4pi
Use Euler's formula to find the missing number vertices 22 edges 34 faces?a.10b.12c.14d.16
An accountant invested $5000 at a simple intereste of 8 % for 2 years. What total amount of interest will› have from her investment?

IF U GET THE RIGGT ANSCER I WILL MARK U AS!! The prices and sizes of popcorn sold at local theaters are shown in the table. Popcorn Prices and Sizes at Different Theaters Ounces Price CinePlex 100 $8.25 Mr. Movie 96 $7.00 Stadium Cinema 112 $6.50 Theater Mania 136 $7.50 Which theater's popcorn is the best buy?
O Cine Plex
O Mr. Movie
O Stadium Cinema
O Theater Mania

Answers

Answer:

Theater mania

Answer:

ur answer is the last one TheaterMania

I took the test on Edg.

Step-by-step explanation:

Help please =) I need to get this right so I can move on in my lesson things

Answers

Answer:

The 3rd choice

Answer: the third one

Step-by-step explanation:

to get from 6 to 3 u divide by 2 and same thing goes for 10 to 5 and 14 to 7

hope this help! :)

Tara has a box of 908 beads for an bracelet she wants to put 15 beads on each bracelet what is the greatest number please help me

Answers

The maximum 60 bracelets, Tara can have with 15 beads in each bracelet.

What is division?

The division in mathematics is one kind of operation. In this process, we split the expressions or numbers into same number of parts.

Given, Tara has a box of 908 beads.

And one bracelet has 15 beads as per Tara's wish.

To find the number of bracelets,

we divide the total beads to beads in one bracelet.

That means,

Number of bracelets = 908 / 15= 60 (rounded)

Therefore, the maximum 60 bracelets, Tara can have with 15 beads in each bracelet.

To learn more about the division;

brainly.com/question/13263114

#SPJ2

Answer:

60 bracelets

Step-by-step explanation:

908 / 15 = 60.5

you can not have half a bead on the bracelets so round down because you only have 908 beads and do not have more.

A polling company conducts an annual poll of adults about political opinions. The survey asked a random sample of 419 adults whether they think things in the country are going in the right direction or in the wrong direction, 54% said that things were going in the wrong direction. How many people would need to ve surveyed for a 90% confidence interval to ensure the margin or error would be less than 3%?