Which one of the three risky funds do you choose

Reference no: EM13834667

Choosing One Portfolio. The following table shows your predictions of the future returns on three mutual funds. Treasury Bills currently earn 4%. To invest all your wealth, you are limited to choosing a portfolio of only one of these three funds along with T-Bills. You are risk averse and able to borrow and short-sell. Which one of the three risky funds do you choose to invest in. Simple calculations or a graph may be helpful to illustrate your choices.

Compare Fund A to Fund B. Which do you prefer? Explain.


	T-Bills	Fund A	Fund B	Fund C

E[r_p]	4%	16%	16%	10%
$\delta p$ dp		25%	20%	12%
$\beta p$ ßp		.90	1.00	0.60

Reference no: EM13834667

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