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AVERAGE ANNUAL RETURNS, ARITHMETIC AVERAGES & STANDARD DEVIATIONS Here are the total returns for the S&P500 for the first ten years of this century. Assume

AVERAGE ANNUAL RETURNS, ARITHMETIC AVERAGES & STANDARD DEVIATIONS

Here are the total returns for the S&P500 for the first ten years of this century. Assume you invested $1 in the S&P500 on January 1, 2001.

In the first year, you lost 11.85% of your money.

Year

Return

2001

-11.85%

2002

-21.97%

2003

28.36%

2004

10.74%

2005

4.83%

2006

15.61%

2007

5.48%

2008

-36.55%

2009

26.94%

2010

18.00%

4 points. Q1. If you invested $1 at the beginning of the time frame [1/1/2001], how much would it be worth five years later? Show work and calculations.

4 points. Q2. If you invested $1 at the beginning of the time frame [1/1/2001], how much would it be worth ten years later? Show work and calculations.

4 points. Q3. What was the arithmetic return for the 10-year period?

4 points. Q4. What was the standard deviation of returns for the 10-year period?

2 points. Q5. What was the variance of returns for the 10-year period?

2 points. Q6. If you assumed returns were "normally distributed", what range of returns would you expect 68% of the time for a given year?

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