Standard deviation & Average real return

Hello all,

I am studying finance in masters degree and at the moment preparing for my exams. I have an urgent question with regards to the subject mentioned in message title.

Although I have to admit that I would need the answer by today itself as I have my exams tomorrow.

I have the answer but don't understand how to deduce it by working it out.

Q1.     year             nominal return %        Inflation %

           2002                 -20.9                           2.4

           2003                   +31.6                         1.9

           2004                   +12.5                          3.3

           2005                     +6.4                           3.4

           2006                     +15.8                         2.5

 

The table shows the nominal returns on US shares and the rate of inflation.a) What is the standard deviation of the market returns and also, b) calculate the average real return.

The answer for the a) is 19.2% b) 6.2%

Q2)      year             nominal return %        S&P returns %

           2002                 -12.1                           -20.9

           2003                   +28.2                         +31.6

           2004                   +11.00                          +12.5

           2005                     +8.9                           +6.4

           2006                     +15.0                         +15.8

Being a mutual fund manager, you have produced the above percentage rate of return from 02 to 06. Rates of return on the market are given for comparison.

Calculate the a) average return and b) standard deviation for your mutual fund.

Answers are a) 10.2% b) 14.5%

I would be highly grateful if someone would show me the work out in coming up with the answers given.

Thanks a lot!

Garima

 

Replies (5)

 they so easy........... call me at 98789-00408

Well, if it is easy then please can't u leave a solution.

Any ways, I am not based in India.

Thanks any way.

Garima

first of all find  the proportion of investment

there is nothing like that to it askhat.

This is what it is and the solution has to be derived from info itself.

find mean of nominal return to find avg rate of return

cov(x,y)/Sx where the x is s&p 500 or inflation and y is nominal return

hope u got the answer now

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