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An investor is trying to decide between 2 mutual funds. Mutual fund #1 offers a slightly higher return than mutual fund #2 so the investor decides that he will invest in mutual fund #1 unless the risk of mutual fund #1 is significantly higher than the risk of mutual fund #2. Using the standard deviation of 101 daily returns as a measure of risk of the two mutual funds, the investor finds that the standard deviation of mutual fund #1’s daily returns is .95 and the standard deviation of mutual fund #2’s daily returns is .81. At the 10% level of significance, should the investor invest in mutual fund #1 or #2?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91421611

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