In the lab template, on the Annual Returns for Key Indices worksheet, you are provided with a list of eight investment indices comprising seven different domestic asset classes and one international. Mutual funds that track these indices are known as index funds, and will tend to exhibit the same characteristics (including average yield and volatility). The indices are categorized by small and large stocks (Russell 2000 vs. S&P 500) and by growth and value stocks:

1. Russell 2000 Index of 2000 smaller stocks

2. Russell 2000 Growth Russell 2000 securities with the greatest growth orientation as indicated by higher P/E ratios and lower dividends.

3. Russell 2000 Value Russell 2000 securities with lower price per book, lower P/E ratios, and higher dividend yields

4. S&P 500 Index of stocks of 500 of the largest domestic companies representing a broad range of industries

5. S&P/Barra 500 Growth Stocks (larger companies) within the S&P 500 exhibiting growth characteristics

6. S&P/Barra 500 Value - Stocks (larger companies) within the S&P 500 exhibiting value characteristics

7. Lehman Brothers Aggregate Bond Index index of municipal and corporate bonds, longer and shorter term

8. MSCI EAFE Morgan Stanley Capital International index of equities within Europe, Australia, New Zealand, and the Far East.

Starting on the Annual Returns for Key Indices worksheet, calculate the following statistics for each of the eight mutual fund indices:

a. average return

b. standard deviation of returns

c. minimum return

d. maximum return

e. number of negative returns

f. Sharpe ratio assuming a risk free rate of 5%

With the results from calculations a through f above, determine:

a. Which asset class appears most risky?

b. Which asset class appears least risky?

c. Which asset class has the highest return per unit of standard deviation?

d. Which asset class has the lowest return per unit of standard deviation?

Russell Russell S&P/Barr S&P / Russell 2000 2000 S&P 500 a 500 Barra 500 MSCI 2000 Growth Value Index Growth Value EAFE 1980 38.58% 52.26% 25.39% 32.50% 39.40% 23.59% 22.60% 1981 2.03% -9.23% 14.85% -4.92% -9.81% 0.02% -2.27% 1982 24.95% 20.99% 28.52% 21.55% 22.03% 21.04% -1.86% 1983 29.13% 20.14% 38.63% 22.56% 16.24% 28.89% 23.69% 1984 -7.13% -15.84% 2.27% 6.27% 2.33% 10.52% 7.41% 1985 31.04% 30.97% 31.01% 31.73% 33.31% 29.68% 56.14% 1986 5.69% 3.59% 7.41% 18.67% 14.50% 21.67% 69.46% 1987 -8.76% -10.48% -7.12% 5.25% 6.50% 3.68% 24.64% 1988 24.89% 20.38% 29.47% 16.61% 11.95% 21.67% 28.26% 1989 16.25% 20.16% 12.43% 31.69% 36.40% 26.13% 10.53% 1990 -19.50% -17.42% -21.77% -3.11% 0.20% -6.85% -23.45% 1991 46.05% 51.18% 41.70% 30.47% 38.37% 22.56% 12.14% 1992 18.42% 7.77% 29.15% 7.62% 5.06% 10.52% -12.18% 1993 18.89% 13.37% 23.86% 10.08% 1.68% 18.61% 32.57% 1994 -1.81% -2.44% -1.55% 1.32% 3.14% -0.64% 7.78% 1995 28.44% 31.04% 25.75% 37.58% 38.13% 36.99% 11.21% 1996 16.53% 11.32% 21.37% 22.96% 23.97% 22.00% 6.05% 1997 22.36% 12.93% 31.78% 33.36% 36.52% 29.98% 1.78% 1998 -2.55% 1.23% -6.46% 28.58% 42.16% 14.69% 20.00% 1999 21.26% 43.09% -1.48% 21.04% 28.25% 12.72% 26.96% 2000 -3.02% -22.43% 22.83% -9.10% -22.07% 6.08% -14.17% 2001 2.49% -9.23% 14.03% -11.88% -12.73% -11.71% -21.44% 2002 -20.48% 30.26% -11.43% -22.10% -23.59% -20.85% -15.94% 2003 47.25% 48.54% 46.03% 28.68% 25.66% 31.79% 38.59% 2004 18.33% 14.31% 22.25% 10.88% 6.13% 15.71% 17.59% 2005 4.55% 4.15% 4.71% 4.91% 3.46% 6.33% 10.86% 2006 18.37% 13.35% 23.48% 15.80% 11.01% 20.80% 23.47% Lehman Brothers Agg 2.71% 6.26% 32.65% 8.19% 15.15% 22.13% 15.30% 2.75% 7.89% 14.53% 8.96% 16.00% 7.40% 9.75% -2.92% 18.46% 3.64% 9.64% 8.70% -0.82% 11.63% 6.44% 10.25% 4.10% 4.34% 2.43% 4.33%