An investor wants to invest $300,000 in a portfolio of three mutual funds. The annual fund returns are normally distributed with a mean of 2.00% and standard deviation of 0.30% for the short-term investment fund, a mean of 5.00% and standard deviation of 2.50% for the intermediate-term fund, and a mean of 6.25% and standard deviation of 5.50% for the long-term fund. An initial plan for the investment allocation is 45% in the short-term fund, 35% in the intermediate-term fund, and 20% in the long-term fund.

1) Use Analysis ToolPak, with a seed of 1, to develop a Monte Carlo simulation with 100 trials to estimate the mean ending balance after the first year.

2) If the allocation is changed to 30% short-term, 55% intermediate-term, and 15% long-term, estimate the ending balance after the first year.

3) Compare the two investment strategies in parts a and b and choose the most appropriate answer from the following choices.

(a)On average, the investment strategy in part a is more risky and yields a lower return. (b)On average, the investment strategy in part a is less risky and yields a higher return. (c) On average, the investment strategy in part a is less risky but yields a lower return. (d)On average, the investment strategy in part a is more risky but yields a higher return