Pax World Balanced is a highly respected, socially responsible mutual fund of stocks and bonds. Vanguard Balanced Index is another highly regarded fund that represents the entire U.S. stock and bond market (an index fund). The mean and standard deviation of annualized percent returns are shown below. The annualized mean and standard deviation are based on the years 1993 through 2002 (Source: Morningstar). Pax World Balanced: x = 9.81%; s = 14.31%

Vanguard Balanced Index: x = 8.62%; s = 12.90%

(a) Compute the coefficient of variation for each fund. (Enter your answers to the nearest integer.)

Pax	Vanguard
CV	%	%

If x represents return and s represents risk, then explain why the coefficient of variation can be taken to represent risk per unit of return. From this point of view, which fund appears to be better? Explain.

Since the CV is s/s² we can say that the CV represents the risk per unit of return; the Pax fund appears to be better because the CV is smaller.

Since the CV is s/s² we can say that the CV represents the risk per unit of return; the Vanguard fund appears to be better because the CV is smaller.

Since the CV is s/x we can say that the CV represents the risk per unit of return; the Pax fund appears to be better because the CV is smaller.

Since the CV is s/x we can say that the CV represents the risk per unit of return; the Vanguard fund appears to be better because the CV is smaller.

Since the CV is s/x we can say that the CV represents the risk per unit of return; neither fund is better because the CV's are equal.

Since the CV is s/s² we can say that the CV represents the risk per unit of return; neither fund is better because the CV's are equal.

(b) Compute a 75% Chebyshev interval around the mean for each fund. (Enter your answers to 2 decimal places.)

Pax	Vanguard
Lower Limit
Upper Limit