Question 1
Multiple Choice
Confidence Level
0%
Exhibit 1 shows the annual total returns for the MSCI Developed Markets Index over a 10-year period.
Exhibit 1: MSCI Developed Markets Index Returns
Year 1 9.15% Year 6 21.48%
Year 2 5.34% Year 7 14.29%
Year 3 13.02% Year 8 –7.61%
Year 4 4.50% Year 9 17.63%
Year 5 –28.47% Year 10 26.75%
The third quintile return for the MSCI Developed Markets Index is closest to:
Explanation
The third quintile represents the 60th percentile.
Step 1: Use the percentile location formula:
L _{60} = (n +1) × \frac{60}{100} = ( 10+1) × 0.60 = 11 × 0.60 = 6.6
Step 2: Sort the returns in ascending order:
–28.47%, –7.61%, 4.50%, 5.34%, 9.15%, 13.02%, 14.29%, 17.63%, 21.48%, 26.75%
Step 3: Find the values between which the 60th percentile lies:
The 6.6th position lies between:
6th value: 13.02%
7th value: 14.29%
Step 4: Interpolate:
P60= 13.02 + ( 0.6 × (14.29 − 13.02)) = 13.02 + 0.6 × 1.27 = 13.02 + 0.762 = 13.78%