Exercise $5-62$ Algo

You are considering the risk$-$return profile of two mutual funds for investment. The relatively risky fund promises an expected return of

$7\mathrm{.}5\%$ with a standard deviation of $11\mathrm{.}2\%.$ The relatively less risky fund promises an expected return and standard deviation of $4\mathrm{.}8\%$ and

$6\mathrm{.}7\%,$ respectively. Assume that the returns are approximately normally distributed.

a$-1.$ Calculate the probability of earning a negative return for each fund.

Note: Do not round intermediate calculations. Round your final answers to $4$ decimal places.

a$-2.$ Which mutual fund will you pick if your objective is to minimize the probability of earning a negative return?

Less risky fund

Riskier fund

b$-1.$ Calculate the probability of earning a return above $9\mathrm{.}7\%$ for each fund.

Note: Do not round intermediate calculations. Round your final answers to $4$ decimal places.

b$-2.$ Which mutual fund will you pick if your objective is to maximize the probability of earning a return above $9\mathrm{.}7\%?$

Less risky fund

Riskier fund