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You are considering two mutual funds for your investment. The possible returns for the funds are dependent on the state of the economy and are
You are considering two mutual funds for your investment. The possible returns for the funds are dependent on the state of the economy and are given in the accompanying table. State of the Economy Fund 1 Fund 2 Good 33% 38% Fair 15% 16% Poor 18% 13% You believe that the likelihood is 18% that the economy will be good, 50% that it will be fair, and 32% that it will be poor. a. Find the expected value and the standard deviation of returns for Fund 1. (Round your intermediate calculations to 4 decimal places and final answers to 2 decimal places.) Fund 1 Expected value % Standard deviation b. Find the expected value and the standard deviation of returns for Fund 2. (Round your intermediate calculations to 4 decimal places and final answers to 2 decimal places.) Fund 2 Expected value % Standard deviation c. Which fund will you pick if you are risk averse? Fund 2 Fund 1
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