Mutual fund investing. An investor is considering how to invest her money. She has two options—either a domestic mutual fund that only invests in blue chip stocks or an international aggressive mutual fund that invests in young technical firms. The payoff (profit) after one year for these investments depends on the state of the economy.

a) Compute the EV for each alternative decision.

b) Compute the SD for each decision.

c) Compute the CV and RRR for each decision.

d) Which mutual fund would you invest in and why?

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Economy Improves Declines (0.5) (0.5) Domestic Mutual Fund $1500 $1000 International Mutual Fund $3500 -$1000