Assume the risk-free rate is 4%. You are a financial advisor, and must choose one of the
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Assume the risk-free rate is 4%. You are a financial advisor, and must choose one of the funds below to recommend to each of your clients. Whichever fund you recommend, your clients will then combine it with risk-free borrowing and lending depending on their desired level of risk.
- Which fund would you recommend without knowing your client’s risk preference?
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Fund A Fund B Fund C Expected Return 10% 15% 6% Volatility 10% 22% 2%
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