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ABC fund has an expected return of 7% and a standard deviation of 15%. XYZ fund has an expected return of 17% and a standard
ABC fund has an expected return of 7% and a standard deviation of 15%. XYZ fund has an expected return of 17% and a standard deviation of 30%. The risk free rate is 2%. Your friend is considering investing in one of these two funds, along with some investment in the risk-free asset. If your friend is very risk averse, which fund should your friend choose and why?
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