Question

Name: 3. The means and standard deviations for the monthly returns from three Fidelity mutual funds for the 60 months ending in January 2019 are given in the table below. X = monthly return on Magellan Fund Y = monthly return on Energy Fund z = monthly return on Japan Fund EDX) = 2.28% E(Y) = 4.54% EIZ) = 2.47% S00) - 3.98% SD(Y)= 7.06% SD(Z) = 5 20% Many advisers recommend roughly 20% foreign stocks to diversity portfolios of U.S. stocks. Michael owns Fidelity Magellan Fund, which concentrates on stocks of large American companies. He decides to move to a portfolio of 80% Magellan and 20% Fidelity Japan Fund. Find the mean variance, and standard deviation of the monthly rate of return for his new portfolio (assume the two funds are independent). Show your work using the properties of expected values and variances. Comment on the performance of his portfolio as it relates to the individual returns of the Fidelity Magellan Fund and Fidelity Japan Fund. b) Another Fidelity client Andrew is told by his adviser that he should move to a portfolio of 60% Magellan and 40% Fidelity Energy Fund because he is relatively young (early 30's) and has time for his portfolio to grow with a fund yielding higher returns while taking on slightly more risk. Find the mean, variance, and standard deviation of the monthly rate of return for his new portfolio (assume the two funds are independent). Show your work using the properties of expected values and variances. Comment on the performance of his portfolio as it relates to the individual returns of the Fidelity Magellan Fund and Fidelity Energy Fund.

Answer 1

olution Given that X = Magellam EcX)= 2.289). SD - 3.980). 4 - Energy ELY) - 4.5446 SD - 7.060). 2 - Japan Eld) = 27.47"). Sp - 5.20% a) A -0.8X0.22 ECA) = 0.8E(X)+0. QEC2) was = 0.8 xa.28 +0.2x2.47 VOICA) = (0-8)2 v(x)+ (0.2) V(2) - (0.8) (15.8404 x 109) +co.a)?(27.04x104) VOCA) - 11.9198456 X10 SDCA) = 3.3495 x102Jarca) SDCH) = 3.3495% B = 0.6+ 0.44 ELB) - 0-6 X 228 +0.4 X 4.54 - 8.184 %. Voor(B) = (0-36) x (15.8404x104 )+ (0.16) (49. in4 8436x104) = 13.67752x104

SDCB) - 3.6983x102 SDLB) = 3.6983) In case A mean of the postion has increased from that of x but the SD has dislosed from both x&a In case B, mean has aeduced foom 4, but y had bgb SD, whereas SD of B is comparitivele low. The