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=9.46%;s=14.16%

Vanguard Balanced Index:x=8.73%;s=12.65%

(a) Compute the coefficient of variation for each fund. (Round your answers to one decimal place.)PaxVanguardCV%%

Ifxrepresents return andsrepresents 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 theCViss/s²we can say that theCVrepresents the risk per unit of return; the Pax fund appears to be better because theCVis smaller.

Since theCViss/s²we can say that theCVrepresents the risk per unit of return; the Vanguard fund appears to be better because theCVis smaller.

Since theCViss/xwe can say that theCVrepresents the risk per unit of return; the Pax fund appears to be better because theCVis smaller.

Since theCViss/xwe can say that theCVrepresents the risk per unit of return; the Vanguard fund appears to be better because theCVis smaller.

Since theCViss/xwe can say that theCVrepresents the risk per unit of return; neither fund is better because theCV's are equal.

Since theCViss/s²we can say that theCVrepresents the risk per unit of return; neither fund is better because theCV's are equal.

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

Use the intervals to compare the two funds. As usual, past performance does not guarantee future performance.

Vanguard has a wider range of returns, with less downside, but also less upside.

Vanguard has a narrower range of returns, with more downside, but also more upside.

Vanguard has a narrower range of returns, with less downside, but also less upside.

Vanguard has a wider range of returns, with more downside, but also more upside.