The data in the worksheet file MUFUND1.XLS contains information on two types of mutual funds: Equity funds (1), and Bond funds (2). Other variables in the data file are EXP = Expense ratio, PER1 = I year performance (Rate of return), PER3 = 3 year performance (Rate of return). and ASSET = Asset Size in Millions.

What is a Mutual Fund?

A mutual fund is a means by which small investors are able to participate in investments in diversified portfolios by pooling their funds. This is accomplished by contributing money into a pool of funds involving large numbers of investors, the total amount of whose contributions is large, thus making it possible for people who have small sums of money to diversify their portfolios. The money contributed by members is usually managed by investment companies that call themselves mutual funds. Periodically the fund managers distribute profits from dividends or interest payments, and from capital gains. Usually, the returns to investment in mutual funds are net of expenses incurred by the fund managers.

1. A bond fund is a mutual fund that invests only in bonds

2. An equity fund is a fund that invests only in stocks (i.e. in ownership claims)

3. The Expense ratio is the ratio of total expenses to total net assets of the fund.

4. The three-year performance (Rate of Return) is the average rate of profits over a three-year period. The one-year performance is the average rate of return in the last fiscal year of the fund.

ASSIGNMENT

Using the information from the data file, calculate means, and standard deviations to compare the equity funds with the bond funds. Be sure to compare the asset sizes, performances, and expense ratios.

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MIUTULL FUNDS MIUTULL FUNDS