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Fund-1 Fund-2 Fund-3 Fund-4 year S&P index small cap stock fund Large cap Bond fund Large cap stock fund Hybrid Fund : Includes Both stocks

Fund-1

Fund-2

Fund-3

Fund-4

year

S&P index

small cap stock fund

Large cap Bond fund

Large cap stock fund

Hybrid Fund : Includes Both stocks and bonds

1

2003

28.39

46.44

3.72

30.26

10.77

2

2004

8.75

15.82

1.6

13.7

6.01

3

2005

3.06

3.15

-3.39

6.37

3.23

4

2006

13.64

16.82

-0.96

14.1

7.93

5

2007

3.33

-1.73

-0.08

-0.74

6.7

6

2008

-37.89

-34.08

-5.57

-34.79

-10.53

7

2009

22.52

23.46

3.43

15.29

12.08

8

2010

12.93

25.3

4.11

13.82

9.22

9

2011

-0.09

-5.5

4.9

3.23

3.77

10

2012

12.5

18.04

5.96

19.12

6.54

Problem 1

Standard Dev

?

?

?

?

?

Problem 2

BETA

Base line

?

?

?

?

Problem 3: For each scenario explain, based on the data above and risk parameters assessment (STD deviation and beta) which funds would you recommend and explain why? 40 points

  1. Jack would like to make on average 8 % return but is uncomfortable with major drops. Any drop over 15 % in one year makes him nervous.
  2. Jill is very nervous investor and even a 10 % drop makes her very uncomfortable.
  3. Jane is young and comfortable riding the market over next 30 years.

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