Pedro Fernández should advice his client to go with the second mutual fund named as Fund Corporation. This is because, it showed an higher average return over the five-year period at an average of 11% beating Trujix Inc by 3%.
To get the better fund, Pedro must calculate a simple average of the interest rates of the various funds over the past 5 year period.
Trujix Inc 5-Year Average
(12 + 10+ 3 +9 + 11)/5
= 45/5
=9%
Fund Corporation 5-Year Average
(13 + 12 +14 + 10+ 6)/5
= 55/5
= 11%
Hence, the better investment is the one by Fund corporation.
Full Question
Pedro Fernández is a manager at Avon Chic, Pedro was interested in the rates of return for the last five years of two different mutual funds. Trujix, Inc., showed a five-year period, rates of return of 12; 10; 3; 9 and 11%, while Fund Corporation showed 13; 12:14:10 and 6%. A client approached Pedro and expressed his interest in one of these mutual funds. Which one should Pedro choose for his client?
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