(Related to Checkpoint 8.1)(Expected rate of return)James Fromholtz is considering whether to invest in a newly formed investment fund. The fund's investment objective is to acquire home mortgage securities at what it hopes will be bargain prices. The fund sponsor has suggested to James that the fund's performance will hinge on how the national economy performs in the coming year. Specifically, he suggested the following possible outcomes:

State of Economy Probability Fund Returns

Rapid expansion and recovery 15% 100%

Modest growth 30% 30%

Continued recession 40% 10%

Falls into depression 15% -100%

a.The expected rate of return from this investment opportunity is ______%. (Round to two decimal places)

Part 2

b.Would you be interested in making such an investment?(Select the best choice below.)

A. Your interest in making such an investment would depend on your risk tolerance. If you do not like risk you should avoid this investment, however if you do not mind risk you may want to make this investment.

B. No, I would not be interested in making such an investment. The economy is most likely to sink into a depression.

C. Yes, I would be interested in making such an investment. The economy is most likely to begin a rapid expansion and recovery.