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4) (20 points) There are two mutually exclusive investment opportunities. Their returns are independent and normally distributed. First alternative has an expected return of 10.4%
4) (20 points) There are two mutually exclusive investment opportunities. Their returns are independent and normally distributed. First alternative has an expected return of 10.4% and standard deviation of 1.2%. Second alternative has an expected return of 11% and standard deviation of 4%. If an investor wants to earn at least 10% return, which one should she choose? (Hint: Which one offers higher probability of earning 10% return?)
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