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You are considering two mutual funds as an investment. The possible returns for the funds are...

You are considering two mutual funds as an investment. The possible returns for the funds are dependent on the state of the economy and are given in the accompanying table.

State of the Economy Fund 1 Fund 2
Good 39 % 37 %
Fair 16 % 21 %
Poor −17 % −9 %

You believe that the likelihood is 10% that the economy will be good, 52% that it will be fair, and 38% that it will be poor.

a. Find the expected value and the standard deviation of returns for Fund 1. (Round intermediate calculations to at least 4 decimal places and final answers to 2 decimal places.)

b. Find the expected value and the standard deviation of returns for Fund 2. (Round intermediate calculations to at least 4 decimal places and final answers to 2 decimal places.)

c. Which fund will you pick if you are risk averse?

  • Fund 2

  • Fund 1

Math   Statistics-And-Probability   
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