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You are considering two mutual funds as an investment. The possible returns for the funds...

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Accounting

You are considering two mutual funds as an 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 20% 40%
Fair 10% 20%
Poor 10% 40%

You believe that the likelihood is 20% that the economy will be good, 50% that it will be fair, and 30% that it will be poor.

a.

Find the expected value and the standard deviation of returns for Fund 1. (Round your 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 final answers to 2 decimal places.)

Fund 2
Expected value %
Standard deviation %

c.

Which fund will you pick if you are risk averse?
Fund 1
Fund 2

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