You are considering the risk-return profile of two mutual funds for investment. The relatively risky fund promises an expected return of 8% with a standard deviation of 14%. The relatively less risky fund promises an expected return and standard deviation of 4% and 5%, respectively. Assume that the returns are approximately normally distributed. [You may find it useful to reference the z table.] a-1. Calculate the probability of earning a negative return for each fund. (Round your final answers to 4 decimal places.) a-2. Which mutual fund will you pick if your objective is to minimize the probability of earning a negative return? multiple choice 1 Riskier fund Less risky fund b-1. Calculate the probability of earning a return above 8% for each fund. (Round your final answers to 4 decimal places.) b-2. Which mutual fund will you pick if your objective is to maximize the probability of earning a return above 8%? multiple choice 2 Riskier fund Less risky fund
You are considering the risk-return profile of two mutual funds for investment. The relatively risky fund promises an expected return of 8% with a standard deviation of 14%. The relatively less risky fund promises an expected return and standard deviation of 4% and 5%, respectively. Assume that the returns are approximately
a-1. Calculate the
a-2. Which mutual fund will you pick if your objective is to minimize the probability of earning a negative return?
multiple choice 1
-
Riskier fund
-
Less risky fund
b-1. Calculate the probability of earning a return above 8% for each fund. (Round your final answers to 4 decimal places.)
b-2. Which mutual fund will you pick if your objective is to maximize the probability of earning a return above 8%?
multiple choice 2
-
Riskier fund
-
Less risky fund
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