Data Analysis and Interpretation Flashcards

A mutual fund's standard deviation is 12% and its mean return is 8%. What does this indicate about the fund's risk profile?

Answer: Returns can typically range from -4% to 20% within one standard deviation

One standard deviation means returns typically fall within one SD above or below the mean, so 8% ± 12% gives a range of -4% to 20%.

Which measure best captures the risk-adjusted return of a portfolio compared to a benchmark index?

Answer: Alpha

Alpha measures a portfolio's excess return relative to its benchmark after adjusting for risk, indicating manager skill.

A fund reports a trailing 3-year annualized return of 9%. An investor contributed $10,000 three years ago. Approximately what is the current value?

Answer: $12,950

Using compound growth: $10,000 × (1.09)^3 ≈ $10,000 × 1.295 ≈ $12,950.

When analyzing a fund's performance chart, a consistently upward-sloping line with few dips most likely indicates:

Answer: Low volatility and relatively stable positive returns

A smooth upward slope with few dips indicates low volatility and consistent positive performance over the period.

A balanced fund has 60% equities and 40% fixed income. If equities return 10% and fixed income returns 4%, what is the blended portfolio return?

Answer: 7.6%

Blended return = (0.60 × 10%) + (0.40 × 4%) = 6% + 1.6% = 7.6%.

Which of the following best describes a positively skewed return distribution for a mutual fund?

Answer: Most returns cluster below the mean with a long right tail

Positive skew means the tail extends to the right, so most returns fall below the mean but occasional large gains pull the mean upward.

A fund's correlation with the broad market is 0.95. This means the fund:

Answer: Moves almost identically with the market

A correlation of 0.95 (close to 1.0) indicates the fund's returns move almost in lockstep with the broad market.