QUESTION 1 Suppose you own shares of a mutual fund. Whether a share price of that mutual fund will go up or down in any particular time period depends on the ability of the fund manager. The probability of price going up for the well managed mutual fund is equivalent to the probability of drawing a red ball from a um with 6 red and 4 white balls, with replacement. That is, there is 60% chance that the share price of an well managed fund will go up. Where as, the probability of price going up for the poorly managed mutual fund is equivalent to the probability of drawing a red ball from a um with 3 red and 7 white balls, with replacement. The prior probability that the fund is well managed is 0.5 and that the fund is poorly managed is 0.5. After observing the share price going down twice you have to estimate the probability that the fund is poorly managed. a) What will be your estimate according to Bayes' rule? (6 points) b) What will be your estimate if you are subject to the 'aw of small numbers' bias? (6 points) For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac) 12 points Save Amer