1. What is the average return? Compute your answer to three decimal places.

2. What is the standard deviation of the returns? (Hint, use sample stdev formula not the population formula. Recall this from your Stats class or google it). Compute your answer to three decimal places.

3. Assume you've made a relative-frequency distribution graph of the above returns, which you believe enables this data to be approximated with (modeled by) a Normal Density function. To use this Normal Density function to model future SPSM returns, which big assumption is most important?

C) World peace will not be declared anytime soon.

B) SPSM's future returns, over the long haul, will look like its historical returns.

A) There will be no periods of recession in the forecasting window.

D) Inflation we be contained during the forecast window.

4. Given a set of annual historical returns that are well approximated by the normal disribution, with expected value 10% and standard deviation 20%. Which statement(s) are true?

B) The VaR return will be achieved about 5% of the time.

A) The VaR return will be achieved about 10% of the time.

C) On average, over the long haul, the VaR return or something worse will occur about once in 20 years.

D) On average, over the long haul, the VaR return or something worse will occur about once in 10 years.

E) A and D

F) B and D

Use this info for the next three questions. Consider these historical annual returns for the SPSM small-cap ETF. (Google it as needed). Date Return 12/31/99 -22.180% 12/31/00 0.270% 12/31/01 4.190% 12/31/02 12/31/03 12/31/04 12/31/05 38.310% 16.520% 25.600% 27.330% 31.530% 21.430% 10.500% -0.790% 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 14.120% 12/31/11 -16.340% 9.810% 12/31/12 12/31/13 14.830% -2.430% 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 -2.670% -38.250% 12.500% 32.650% Use this info for the next three questions. Consider these historical annual returns for the SPSM small-cap ETF. (Google it as needed). Date Return 12/31/99 -22.180% 12/31/00 0.270% 12/31/01 4.190% 12/31/02 12/31/03 12/31/04 12/31/05 38.310% 16.520% 25.600% 27.330% 31.530% 21.430% 10.500% -0.790% 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 14.120% 12/31/11 -16.340% 9.810% 12/31/12 12/31/13 14.830% -2.430% 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 -2.670% -38.250% 12.500% 32.650%