A financial advisor has recommended two possible mutual funds for investment: Fund A and Fund B$.$ The return that will be

achieved by each of these depends on whether the economy is good, fair, or poor. Fund A will return. $$10,000$ for a good

economy; $$2,000$ for a fair economy; $-$$$5,000$ for a poor economy Similarly, Fund B will retum $$6,000$ for a good economy;

$$4,000$ for a fair economy; $$0$ for a poor economy. The probabilities for the different states of nature have been estimated as

follows: Good economy $0\mathrm{.}2,$ fair economy $0\mathrm{.}3$ and poor economy $0\mathrm{.}5.$

i$.$ Perform the necessary calculations to determine which of the two mutual funds is better. Which one should you choose to

maximize the expected value? $($Select the corresponding EMV$)$

E Suppose there is a question about the return of Fund A in a good economy. It could be higher or lower than $$10,000$ What

value for this would cause a person to be indifferent between Fund A and Fund B $($i$.$e$.,$ the EMVs would be the same$)?$

Select one

$2$

O b

O C$.$

d$.$

Oe

None of the options provided

i$.$ EMV$=$$$2,400$ ii$.$ Return $=$ $$20,000$

i$.$ EMV$=$$$1,400$ ii$.$ Return $=$ $$6,000$

i$.$ EMV$=$$$10,400$ ii$.$ Return $=$ $$5,000$

i$.$ EMV$=$$$2,400$ ii$.$ Return $=$ $$21\mathrm{.}500$