Morningstar tracks the total return for a large number of mutual funds. The following table shows the

Question:

Morningstar tracks the total return for a large number of mutual funds. The following table shows the total return and the number of funds for four categories of mutual funds (Morningstar Funds 500, 2008).

a. Using the number of funds as weights, compute the weighted average total return for the mutual funds covered by Morningstar.
b. Is there any difficulty associated with using the â€œnumber of fundsâ€ as the weights in computing the weighted average total return for Morningstar in part (a)? Discuss. What else might be used for weights?
c. Suppose you had invested $10,000 in mutual funds at the beginning of 2007 and diversified the investment by placing $2000 in Domestic Equity funds, $4000 in International Equity funds, $3000 in Specialty Stock funds, and $1000 in Hybrid funds. What is the expected return on theportfolio?

Mutual Funds
Mutual funds are like a pool of funds gathered by different small investors that have simalar investment perspective about returns on their investments. These funds are managed by professional investment managers who act smartly on behalf of the... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...