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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Finance: European Growth Fund A european growth mutual fund specializes in stocks from the British Isles, continental Europe, and Scandinavia. The fund has over 100 stocks. Let x be a random variable that represents the monthly percentage return for this fund. Based on information from Morningstar , x has mean μ = 1.4% and standard deviation σ = 0.8%.
(a) Let’s consider the monthly return of the stocks in the European growth fund to be a sample from the population of monthly returns of all European stocks. Is it reasonable to assume that x (the average monthly return on the
100 stocks in the European growth fund) has a distribution that is approximately normal? Explain.
 (b) After 9 months, what is the probability that the average monthly percentage returnÂ
will be between 1% and 2%?
(c) After 18 months, what is the probability that the average monthly percentage returnÂ
will be between 1% and 2%?
(d) Compare your answers to parts (b) and (c). Did the probability increase as n (number of months) increased? Why would this happen?
(e)Â Interpretation:Â If after 18 months the average monthly percentage return
is more than 2%, would that tend to shake your confidence in the statement that μ = 1.4%? If this happened, do you think the European stock marketmight be heating up? Explain.
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