A finished FIN-375 Topic 2 realized return statistics example, turning five years of fund returns into means, standard deviations and reward-to-risk ratios, and declining to rank by return alone. Searches like "fin 375 topic 2 assignment example", "fin375 topic 2 sample" and "fin-375 topic 2 example" land here.
What a finished FIN-375 Topic 2 realized return statistics looks like
The finished example tables five illustrative years. The stock fund returned 18, minus 12, 25, 6 and minus 4 percent; the bond fund 5, 3, minus 2, 6 and 4 percent; Treasury bills averaged 2 percent. The stock fund's arithmetic mean is 6.6 percent, but its geometric mean, the rate that actually compounded, is about 5.7, and the example explains the gap as the cost of volatility. The bond fund's two means are both about 3.2. Sample standard deviations are about 15.2 percent for stocks and 3.1 for bonds. Dividing each fund's return above Treasury bills by its standard deviation gives about 0.30 for stocks and 0.39 for bonds, so per unit of risk the bond fund paid more over this window. Five years, it adds, is far too short to settle which pays more over time.
How a FIN-375 Topic 2 example is structured
The example moves from raw returns to a comparison in five steps. The opening table lists each year's return for both funds and the Treasury bill rate, with a note that the figures are illustrative and not any real fund's record. A means section computes the arithmetic and geometric averages side by side and shows the stock fund's cumulative growth, about 32 percent, so it is plain which average matches the money. The dispersion section computes sample standard deviation with the deviations squared and summed in view, dividing by four rather than five and saying why. A risk premium passage subtracts the bill rate from each mean. The reward-to-risk section divides that excess by standard deviation and ranks the two funds. A final section argues that a higher past return recommends nothing by itself, and names what a longer record and a stated investor horizon would add.
Two averages for one record
The stock fund's 6.6 percent arithmetic mean and roughly 5.7 percent geometric mean are shown together, and only the second matches what the money did.
Volatility as a drag on compounding
A 12 percent loss needs more than a 12 percent gain to recover, which explains why the more variable fund shows the wider gap between its averages.
Sample deviation with its divisor explained
Five observations leave four degrees of freedom, so the squared deviations are divided by four, a choice the example states openly.
Excess return over Treasury bills
Each fund's mean minus the 2 percent bill rate shows what investors earned for accepting risk at all, the premium this course keeps returning to.
Reward per unit of risk ranked
At about 0.30 against 0.39, the bond fund delivered more excess return per unit of variability over these five years, despite its lower headline return.
Where marks go in FIN-375 Topic 2
Recommending the stock fund because its return was higher, with no word on the variability that came with it, costs more than any other slip, since the question behind the topic is what a return was paid for. Reporting only the arithmetic mean overstates what a multi-year investor actually earned, because the geometric figure is what compounded. Standard deviation divided by five instead of four, without comment, applies the population formula to a sample. Papers that compare raw returns without subtracting the risk-free rate never isolate what investors were paid for bearing risk. A reward-to-risk ratio reported with no interpretation leaves the ranking unexplained. Drawing a firm conclusion from five years treats a short, noisy record as though it settled the question, and the stronger papers say how little five observations can show.
Get a FIN-375 Topic 2 example written to your instructions
Send the FIN-375 Topic 2 problems and the rubric your classroom posts, with the return data your section supplies. We write a custom example to them, with arithmetic and geometric means compared, sample standard deviations worked in view, excess returns computed and each fund ranked on reward per unit of risk, in 24 to 48 hours. The first one is free.
FIN-375 Topic 2 questions, answered
Why do the arithmetic and geometric means differ?
Because losses and gains do not offset symmetrically. A fund that falls 12 percent and then rises 12 percent ends below where it started. The arithmetic mean averages the yearly figures, while the geometric mean finds the single rate that reproduces the actual growth, and the gap widens with volatility. The stock fund's 6.6 and about 5.7 percent show that effect; the steadier bond fund's two means are almost equal.
What does the reward-to-risk ratio measure?
Return above the risk-free rate per unit of total variability, the measure associated with William Sharpe. In the example the stock fund earned 4.6 points above Treasury bills with a standard deviation near 15.2, about 0.30, while the bond fund earned 1.2 points with about 3.1, near 0.39. It compares how well each fund paid for the variability it carried, not which one earned more.
Which fund does the example recommend buying?
Neither. It measures two illustrative five-year records and shows why a higher past return is not a recommendation. Which fund suits anyone depends on their horizon, their other holdings and how much variability they can tolerate, and five years says little about the future. The example demonstrates the measurement FIN-375 asks for; it is coursework, not investment advice.