An individual with cash to invest has two investment choices: Buy a stock fund which every year

Question:

An individual with cash to invest has two investment choices:
Buy a stock fund which every year either earns 40% or -20% with a 50/50 probability.
Buy a bond fund which every year returns either 5% or 0% also with 50/50 probability.
Assume that the returns on the two funds are independent, and that returns from year to year are also identical. Also assume an initial value of $1. (The answers, however, will be unaffected if you use a different initial value.)
a. Which fund does the investor prefer if he looks at his i/ once a year; or ii/ once every two years?
b. How does your answer to part a. help us understand the equity premium puzzle? Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...