Choosing One Portfolio. The following table shows your predictions of the future returns on three mutual funds. Treasury Bills currently earn 4%. To invest all your wealth, you are limited to choosing a portfolio of only one of these three funds along with T-Bills. You are risk averse and able to borrow and short-sell. Which one of the three risky funds do you choose to invest in. Simple calculations or a graph may be helpful to illustrate your choices.

Compare Fund A to Fund B. Which do you prefer? Explain.

T-Bills Fund A Fund B Fund C

E[r_p] 4% 16% 16% 10%

p 25% 20% 12%

p .90 1.000 .60

You will upload a Word Document that shows all of your work and the solution.