Type or paste question here Consider the returns on Judes portfolio, comprised of 45% in Fund Garden
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Consider the returns on Judes portfolio, comprised of 45% in Fund Garden and 55% in Fund Heaven?
State of Economy | Probability of State of Economy | Returns if State Occurs | |
|
| Fund Garden | Fund Heaven |
Boom | 36% | 21% | 13% |
Normal | 64% | 13% | 5% |
A rational investor would prefer the portfolio to the individual funs because
A. | Portfolio standard deviation is a weighted average of the standard deviations of the two funds. | |
B. | Portfolio standard deviation would be lower during normal State of economy. | |
C. | Portfolio standard deviation could be smaller than lower of the two standard deviations of the two funds. | |
D. | Portfolio standard deviation could be greater than higher of the two standard deviations of the two funds. |
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