Many international funds offer more reasonable equity valuations than those found in the United States. Because international markets often move in different directions than the U.S. market, investments in foreign markets can also reduce an investor?s overall risk. The following table shows the fund type (load or no-load), expense ratio (%), safety rating (0 = riskiest, 10 = safest), and the one-year performance through December 10, 1999, for 20 international funds ( Mutual Funds, February 2000).

a. Use the methods in this chapter to develop an estimated regression equation that can be used to estimate the performance of a fund on the basis of the data provided.

b. Did the estimated regression equation developed in part (a) provide a good fit? Explain.

c. Acorn International is a no-load fund that has an annual expense ratio of 1.12% and a safety rating of 7.6. Use the estimated regression equation developed in part (a) to estimate the one-year performance for Acorn International.

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ABN AMRO Int'l Equity "Com" Accessor Int'l Equity "Adv" Artisan International Columbia Int'l Stock Concert Inv. "A" Int'l Equity Diversified Invstr Int'l Eqty Driehaus Int'l Growth Fund Type No-load No-load No-load No-load Load No-load No-load Expense Ratio (%) 1.38 1.59 1.45 1.56 2.16 1.40 1.88 Safety Rating 6.9 7.1 6.8 7.1 6.3 7.3 6.5 Performance 36 42 72 54 116 54 92 Founders Passport Guardian Baillie Fifford Int'l "A" Jamestown Int'l Equity Julius Baer Int'l Equity Aetna "I" Int'l Pilgrim Int'l Value "A" Fidelity Diversified Int'l Putnam "A" Int'l Growth Sit Int'l Growth Touchstone Int'l Equity "A" United Int'l Growth "A" Vontobel Int'l Equity Waddell & Reed Int'l Growth "B" Fund Type No-load Load No-load No-load No-load Load No-load Load No-load Load Load No-load Load Expense Ratio (%) 1.52 1.62 1.56 1.79 1.35 1.80 1.48 1.59 1.50 1.60 1.28 1.50 2.46 Safety Rating 7.0 7.1 7.1 6.9 7.3 7.1 7.5 6.9 6.9 7.5 7.1 7.0 7.0 Performance 86 37 35 71 46 42 42 55 49 35 47 43 75 ABN AMRO Int'l Equity "Com" Accessor Int'l Equity "Adv" Artisan International Columbia Int'l Stock Concert Inv. "A" Int'l Equity Diversified Invstr Int'l Eqty Driehaus Int'l Growth Fund Type No-load No-load No-load No-load Load No-load No-load Expense Ratio (%) 1.38 1.59 1.45 1.56 2.16 1.40 1.88 Safety Rating 6.9 7.1 6.8 7.1 6.3 7.3 6.5 Performance 36 42 72 54 116 54 92 Founders Passport Guardian Baillie Fifford Int'l "A" Jamestown Int'l Equity Julius Baer Int'l Equity Aetna "I" Int'l Pilgrim Int'l Value "A" Fidelity Diversified Int'l Putnam "A" Int'l Growth Sit Int'l Growth Touchstone Int'l Equity "A" United Int'l Growth "A" Vontobel Int'l Equity Waddell & Reed Int'l Growth "B" Fund Type No-load Load No-load No-load No-load Load No-load Load No-load Load Load No-load Load Expense Ratio (%) 1.52 1.62 1.56 1.79 1.35 1.80 1.48 1.59 1.50 1.60 1.28 1.50 2.46 Safety Rating 7.0 7.1 7.1 6.9 7.3 7.1 7.5 6.9 6.9 7.5 7.1 7.0 7.0 Performance 86 37 35 71 46 42 42 55 49 35 47 43 75

Answer rating: 100% (QA)

a There are two categories of Fund type One is Noload and other is Load Create dummy variable as sho... View the full answer