tion.com/hm.tpx Apps . Exercise 6-48 Static an expected return of 8% wita :land!
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tion.com/hm.tpx Apps . Exercise 6-48 Static an expected return of 8% wita :land!d drain of 14% The relatively less risky fund promises an expected return and standard deviationa3% and 5%Tespectively Assume that to returns are approximately normaly distributed Use Tatle 1 a-1. Calculate the probablity of eaming a negative return for each fund (Round "value to 2 decimal places and final answer te 4 decimal places Riskier fund Less risky fund a 2. Which utual fund will you pick if your objective is to minimize the probablity of earming a negative retum? Riskier fund Less risky fund Calculate the probability of earning a sean above 8% for each trd (Round-2-value to 2 decinal places and final answer to 4 decimal places) b-t. Probabilny Riskier fund Less risky fund b-2. Which mutual fund vell you pick If your objeclive is to maximize the probability of earning a return above 8%? Riskier fund Less risky fund Search the web and Windows LenovoExplanation / Answer
a-1)
riskier fund: P(X<0)=P(Z<(0-8)/14)=P(Z<-0.5714)=0.2839
less risky fund:P(X<0)=P(Z<(0-4)/5)=P(Z<-0.8)=0.2119
a-2) less risky fund
b-1)riskier fund: P(X>8)=P(Z>(8-8)/14)=P(Z>0)=0.5
less risky fund: P(X>8)=P(Z>(8-4)/5)=P(Z>0.8)=0.2119
b-2)
riskier fund
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