Common text for questions 3 and 4 The Russell 1000 (R1000) is a value-weighted index of the largest 1,000 U.S. stocks. The Russell 2000 (R2000) is a value-weighted index of the next largest 2,000 U.S. stocks (that is, stock number 1,001 to 3,000). The Russell 3000 (R3000) is a value-weighted index of the largest 3,000 U.S. stocks - it encompasses both stocks in the R1000 and stocks in the R2000 The table below shows annual total returns for the three indices from 2011 to 2016 R1000 R2000 R3000 1.5% -4.2% 1.0% 2011 2012 16.4% 16.3% 16.4% 2013 33.1% 38.8% 33.6% 2014 13.2% 2015 2016 12.1% 21.3% 12.7% 4.9% -4.4% 12.6% 0.9% 0.5% 3. Calculate the geometric average return for the three indices. Why is the geometric average return of the R3000 closer to that of the R1000 than that of the R2000? 4. Calculate the standard deviation of returns for the three indices. Why is the standard deviation of the R3000 closer to that of the R1000 than that of the R2000