1. What is the average annual (historic) return of the (i) hedge fund, (ii) stock market, and (iii) risk-free asset? Remember that the reported returns provided in the spreadsheet are monthly returns. Multiply by 12 to get annual returns.
2. What is the annualized standard deviation of the (i) hedge fund return, (ii) stock market return, and (iii) risk-free return? Remember, you have been given monthly, not annual, returns, but you need to provide an annual standard deviation value.
3. Given that investors like expected return and dislike risk (a key assumption of financial economics), if standard deviation of return was the correct measure of risk, which of the three assets would you expect investors to choose (if they can choose only one)?

\begin{tabular}{|c|c|c|c|c|c|c|c|} \hline & A & B & c & D & E & F & G \\ \hline & \multicolumn{2}{|c|}{ Monthly Returns } & \begin{tabular}{l} Hedge \\ Fund \end{tabular} & \begin{tabular}{l} Stock \\ Market \end{tabular} & Riskfree & RMRF & RHF-RF \\ \hline 2 & 1990 & December & 2.83% & 2.95% & 0.46% & & \\ \hline & 1991 & January & 3.08% & 4.91% & 0.46% & & \\ \hline & & February & 1.46% & 7.58% & 0.45% & & \\ \hline & & March & 0.59% & 2.89% & 0.49% & & \\ \hline & & April & 1.39% & 0.33% & 0.45% & & \\ \hline & & May & 1.88% & 4.07% & 0.45% & & \\ \hline 8 & & June & 0.37% & 4.40% & 0.43% & & \\ \hline 9 & & July & 2.04% & 4.68% & 0.46% & & \\ \hline 10 & & August & 1.07% & 2.68% & 0.44% & & \\ \hline 1 & & September & 0.80% & 1.10% & 0.42% & & \\ \hline 12 & & October & 2.82% & 1.78% & 0.39% & & \\ \hline 3 & & November & 0.06% & 3.73% & 0.33% & & \\ \hline & & December & 1.63% & 10.68% & 0.32% & & \\ \hline .5 & 1992 & January & 0.49% & 0.12% & 0.29% & & \\ \hline & & February & 2.79% & 1.34% & 0.31% & & \\ \hline & & March & 1.01% & 2.37% & 0.33% & & \\ \hline & & April & 2.86% & 1.34% & 0.27% & & \\ \hline & & May & 0.19% & 0.64% & 0.30% & & \\ \hline & & June & 1.29% & 1.93% & 0.29% & & \\ \hline & & July & 0.00% & 3.99% & 0.25% & & \\ \hline & & August & 0.92% & 2.08% & 0.26% & & \\ \hline & & September & 0.40% & 1.24% & 0.22% & & \\ \hline & & October & 1.40% & 1.10% & 0.21% & & \\ \hline & & November & 1.42% & 4.02% & 0.24% & & \\ \hline & & December & 1.43% & 1.78% & 0.23% & & \\ \hline & 1993 & January & 0.00% & 1.26% & 0.21% & & \\ \hline & & February & 1.93% & 0.54% & 0.23% & & \\ \hline & & March & 1.86% & 2.51% & 0.23% & & \\ \hline & & April & 0.06% & 2.54% & 0.24% & & \\ \hline & & May & 1.72% & 2.96% & 0.25% & & \\ \hline & & June & 0.86% & 0.54% & 0.23% & & \\ \hline & & July & 0.09% & 0.08% & 0.24% & & \\ \hline & & August & 1.78% & 3.95% & 0.25% & & \\ \hline & & September & 0.35% & 0.06% & 0.20% & & \\ \hline & & October & 1.77% & 1.81% & 0.23% & & \\ \hline & & November & 0.26% & 1.76% & 0.24% & & \\ \hline & & December & 0.45% & 1.95% & 0.24% & & \\ \hline 19 & 1994 & January & 2.18% & 3.15% & 0.22% & & \\ \hline 60 & & February & 0.36% & 2.42% & 0.24% & & \\ \hline & & March & 1.52% & 4.58% & 0.28% & & \\ \hline 2 & & April & 1.82% & 0.95% & 0.30% & & \\ \hline 13 & & May & 0.51% & 0.94% & 0.32% & & \\ \hline 14 & & June & 0.29% & 2.79% & 0.29% & & \\ \hline 15 & & July & 1.78% & 3.06% & 0.32% & & \\ \hline 6 & & August & 0.42% & 4.26% & 0.35% & & \\ \hline 7 & & September & 0.82% & 1.84% & 0.36% & & \\ \hline 8 & & October & 1.88% & 1.45% & 0.36% & & \\ \hline & & November & 0.55% & 3.72% & 0.38% & & \\ \hline & & December & 0.66% & 1.26% & 0.30% & & \\ \hline & 1995 & January & 0.92% & 2.04% & 0.43% & & \\ \hline & & February & 0.76% & 3.96% & 0.42% & & \\ \hline & & March & 0.84% & 2.70% & 0.48% & & \\ \hline & & April & 1.69% & 2.50% & 0.48% & & \\ \hline & & May & 1.72% & 3.40% & 0.46% & & \\ \hline & & June & 0.50% & 3.12% & 0.44% & & \\ \hline & & July & 1.08% & 4.08% & 0.45% & & \\ \hline & & August & 0.16% & 0.93% & 0.44% & & \\ \hline & & September & 1.70% & 3.64% & 0.43% & & \\ \hline & & October & 1.60% & 1.13% & 0.42% & & \\ \hline & & November & 0.51% & 4.27% & 0.46% & & \\ \hline & & cember & 110% & % & 038% & & \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|c|} \hline \multicolumn{2}{|c|}{ Monthly Returns } & \multirow{2}{*}{\begin{tabular}{c} \begin{tabular}{c} Hedge \\ Fund \end{tabular} \\ 0.92% \end{tabular}} & \multirow{2}{*}{\begin{tabular}{c} \begin{tabular}{c} Stock \\ Market \end{tabular} \\ 2.46% \\ \end{tabular}} & \multirow{2}{*}{\begin{tabular}{c} Riskfree \\ 0.50% \end{tabular}} & \multirow[t]{2}{*}{ RM-RF } & \multirow[t]{2}{*}{ RHF-RF } \\ \hline & October & & & & & \\ \hline & November & 0.68% & 10.25% & 0.49% & & \\ \hline & December & 0.43% & 2.03% & 0.48% & & \\ \hline \multirow{12}{*}{2001} & January & 2.21% & 3.95% & 0.40% & & \\ \hline & February & 0.14% & 9.93% & 0.40% & & \\ \hline & March & 1.13% & 7.03% & 0.37% & & \\ \hline & April & 1.32% & 8.39% & 0.31% & & \\ \hline & May & 0.32% & 1.06% & 0.28% & & \\ \hline & June & 0.23% & 1.75% & 0.28% & & \\ \hline & July & 0.44% & 1.83% & 0.30% & & \\ \hline & August & 1.01% & 5.91% & 0.28% & & \\ \hline & September & 0.73% & 9.15% & 0.20% & & \\ \hline & October & 1.28% & 2.80% & 0.18% & & \\ \hline & November & 1.21% & 7.87% & 0.16% & & \\ \hline & December & 0.19% & 1.78% & 0.14% & & \\ \hline \multirow{12}{*}{2002} & January & 0.03% & 1.61% & 0.14% & & \\ \hline & February & 0.60% & 2.17% & 0.15% & & \\ \hline & March & 0.46% & 4.47% & 0.14% & & \\ \hline & April & 1.16% & 4.96% & 0.15% & & \\ \hline & May & 2.12% & 1.05% & 0.14% & & \\ \hline & June & 0.26% & 7.02% & 0.14% & & \\ \hline & July & 3.36% & 8.11% & 0.14% & & \\ \hline & August & 0.06% & 0.80% & 0.14% & & \\ \hline & September & 0.13% & 10.00% & 0.13% & & \\ \hline & October & 0.73% & 7.50% & 0.12% & & \\ \hline & November & 0.16% & 6.13% & 0.10% & & \\ \hline & December & 0.06% & 5.33% & 0.09% & & \\ \hline \multirow[t]{12}{*}{2003} & January & 0.27% & 2.34% & 0.10% & & \\ \hline & February & 0.40% & 1.54% & 0.10% & & \\ \hline & March & 1.97% & 1.03% & 0.10% & & \\ \hline & April & 0.10% & 8.28% & 0.09% & & \\ \hline & May & 0.95% & 6.35% & 0.09% & & \\ \hline & June & 1.00% & 1.63% & 0.07% & & \\ \hline & July & 1.44% & 2.31% & 0.07% & & \\ \hline & August & 0.22% & 2.49% & 0.08% & & \\ \hline & September & 0.93% & 0.91% & 0.07% & & \\ \hline & October & 1.32% & 6.03% & 0.08% & & \\ \hline & November & 0.08% & 1.66% & 0.08% & & \\ \hline & December & 0.32% & 4.55% & 0.07% & & \\ \hline \multirow[t]{12}{*}{2004} & January & 0.94% & 2.31% & 0.07% & & \\ \hline & February & 0.50% & 1.55% & 0.08% & & \\ \hline & March & 0.05% & 1.07% & 0.08% & & \\ \hline & April & 0.43% & 2.42% & 0.07% & & \\ \hline & May & 0.66% & 1.41% & 0.08% & & \\ \hline & June & 1.28% & 2.16% & 0.09% & & \\ \hline & July & 0.08% & 3.77% & 0.10% & & \\ \hline & August & 1.33% & 0.27% & 0.12% & & \\ \hline & September & 0.53% & 2.06% & 0.12% & & \\ \hline & October & 0.03% & 1.78% & 0.14% & & \\ \hline & November & 0.79% & 4.82% & 0.17% & & \\ \hline & December & 0.24% & 3.52% & 0.15% & & \\ \hline \multirow[t]{5}{*}{2005} & January & 0.51% & 2.66% & 0.18% & & \\ \hline & February & 0.37% & 2.27% & 0.21% & & \\ \hline & March & 0.85% & 1.69% & 0.22% & & \\ \hline & April & 0.14% & 2.52% & 0.23% & & \\ \hline & May & 0.63% & 3.79% & 0.23% & & \\ \hline \multicolumn{7}{|c|}{ Annual Average } \\ \hline \multicolumn{2}{|c|}{ Annual Std Dev } & & & & & \\ \hline & & & & & & \\ \hline \end{tabular}