Consider three stock funds, which we will call Stock Funds 1, 2, and 3. Suppose that Stock Fund 1 has a mean yearly return of 10.93 percent with a standard deviation of 41.96 percent, Stock Fund 2 has a mean yearly return of 13 percent with a standard deviation of 9.36 percent, and Stock Fund 3 has a mean yearly return of 34.45 percent with a standard deviation of 41.16 percent.
a. For each fund, find an interval in which you would expect 95.44 percent of all yearly returns to fall. Assume returns are normally distributed.
b. Using the intervals you computed in part a, compare the three funds with respect to average yearly returns and with respect to variability of returns.
c. Calculate the coefficient of variation for each fund, and use your results to compare the funds with respect to risk. Which fund is riskier?