# Question: You are considering the risk return profile of two mutual funds

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.

a. Which mutual fund will you pick if your objective is to minimize the probability of earning a negative return?

b. Which mutual fund will you pick if your objective is to maximize the probability of earning a return above 8%?

a. Which mutual fund will you pick if your objective is to minimize the probability of earning a negative return?

b. Which mutual fund will you pick if your objective is to maximize the probability of earning a return above 8%?

**View Solution:**## Answer to relevant Questions

First introduced in Los Angeles, the concept of Korean style tacos sold from a catering truck has been gaining popularity nationally (The New York Times, July 27, 2010). This taco is an interesting mix of corn tortillas with ...Assume a Poisson random variable has a mean of four arrivals over a 10-minute interval.a. What is the mean of the random variable, defined by the time between arrivals?b. Find the probability that the next arrival would be ...Customers make purchases at a convenience store, on average, every six minutes. It is fair to assume that the time between customer purchases is exponentially distributed. Jack operates the cash register at this store. a. ...U.S. consumers are increasingly viewing debit cards as a convenient substitute for cash and checks. The average amount spent annually on a debit card is $7,790 (Kiplinger's , August 2007). Assume that the average amount ...In a local law office, jobs to a printer are sent at a rate of 8 jobs per hour. Suppose that the number of jobs sent to a printer follows the Poisson distribution.a. What is the expected time between successive jobs?b. What ...Post your question