Given the following fund data:

Year	Total Return
2013	10%
2014	16%
2015	-22%
2016	4%
2017	20%

a. The standard deviation of the fund is 16.6%. If the US T-bill rate is 2%, and investors utility functions follow the formula,

U = E( r) Astd²

i. Calculate the coefficient of risk aversion (A) at which an investor would be indifferent between the fund and the T-bill.

ii. Suppose an investor had a coefficient of risk aversion of A = 4. Calculate the Certainty Equivalent Rate for this fund.

iii. Explain what the Certainty Equivalent Rate represents.

b. The Downside Risk (Lower Partial Standard Deviation) for the fund is 13.8%. Explain how this might change an investors perception of the riskiness of the fund. (3 points)