A mutual fund rating agency ranks a fund\'s performance by using one to five sta

Question

A mutual fund rating agency ranks a fund's performance by using one to five stars. A one-star mutual fund is in the bottom 20% of its investment class; a five-star mutual fund is in the top 20% of its investment class. Interpret the meaning of a four-star mutual fund. Choose the correct answer below. A. A four-star fund is in the 4th quintile of the funds. That is, it is above the bottom 60%, but below the top 40% of the ranked funds. B. A four-star fund is in the 5th quintile of the funds. That is, it is above the bottom 80%, but below the top 20% of the ranked funds. C. A four-star fund is in the 3rd quintile of the funds. That is, it is above the bottom 40%, but below the top 40% of the ranked funds. D. A four-star fund is in the 4th quintile of the funds. That is, it is above the bottom 60%, but below the top 20% of the ranked funds. E. A four-star fund is in the 5th quintile of the funds. That is, it is above the bottom 60%, but below the top 20% of the ranked funds. F. A four-star fund is in the 3rd quintile of the funds. That is, it is above the bottom 60%, but below the top 40% of the ranked funds.

Explanation / Answer

A quintile is a statistical value of a data set that represents 20% of a given population, so the first quintile represents the lowest fifth of the data (1-20%); the second quintile represents the second fifth (21% - 40%) and so on

So the right answer is D

A four-star fund is in the 4th quintile of the funds. That is, it is above the bottom 60%, but below the top 20% of the ranked funds.

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