The mutual fund will certainly yield a higher return than the money market .

Question

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Answer 1

Question

Chapter 4, Problem 85E

(a)

To determine

The mutual fund will certainly yield a higher return than the money market.

(a)

Expert Solution

Explanation of Solution

In general, the mutual fund will not certainly yield the higher return than money market because there is a probability distribution association with the rate of return in the mutual fund. However, not all the rate of return will be equivalent to the expected value.

(b)

To determine

A person invests in mutual fund rather than in the money market.

(b)

Expert Solution

Explanation of Solution

In this case, the fund to invest will depend not only on the expected value of the return. However, it also depends on the riskiness of each finance and on how risk averse the consumer is.

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Students have asked these similar questions

As an investment advisor, you tell a client that an investment in a mutual fund has (over the next year) a higher expected return than an investment in the money market. The client then asks the following questions: a. Does that imply that the mutual fund will certainly yield a higher return than the money market? b. Does it follow that I should invest in the mutual fund rather than in the money market? How would you reply?

What is the expected return from an investment if there is a 20 percent chance of a 4 percent return, a 40 percent chance of a 8 percent return, and a 40 percent chance of a 12 percent return

Why are investors’ utility curves important in portfolio theory?

Answer 2

Question

Chapter 4, Problem 85E

(a)

To determine

The mutual fund will certainly yield a higher return than the money market.

(a)

Expert Solution

Explanation of Solution

In general, the mutual fund will not certainly yield the higher return than money market because there is a probability distribution association with the rate of return in the mutual fund. However, not all the rate of return will be equivalent to the expected value.

(b)

To determine

A person invests in mutual fund rather than in the money market.

(b)

Expert Solution

Explanation of Solution

In this case, the fund to invest will depend not only on the expected value of the return. However, it also depends on the riskiness of each finance and on how risk averse the consumer is.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 4, Problem 85E

(a)

To determine

The mutual fund will certainly yield a higher return than the money market.

(a)

Expert Solution

Explanation of Solution

In general, the mutual fund will not certainly yield the higher return than money market because there is a probability distribution association with the rate of return in the mutual fund. However, not all the rate of return will be equivalent to the expected value.

(b)

To determine

A person invests in mutual fund rather than in the money market.

(b)

Expert Solution

Explanation of Solution

In this case, the fund to invest will depend not only on the expected value of the return. However, it also depends on the riskiness of each finance and on how risk averse the consumer is.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 4, Problem 85E

(a)

To determine

The mutual fund will certainly yield a higher return than the money market.

(a)

Expert Solution

Explanation of Solution

In general, the mutual fund will not certainly yield the higher return than money market because there is a probability distribution association with the rate of return in the mutual fund. However, not all the rate of return will be equivalent to the expected value.

(b)

To determine

A person invests in mutual fund rather than in the money market.

(b)

Expert Solution

Explanation of Solution

In this case, the fund to invest will depend not only on the expected value of the return. However, it also depends on the riskiness of each finance and on how risk averse the consumer is.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 4, Problem 85E

(a)

To determine

The mutual fund will certainly yield a higher return than the money market.

(a)

Expert Solution

Explanation of Solution

In general, the mutual fund will not certainly yield the higher return than money market because there is a probability distribution association with the rate of return in the mutual fund. However, not all the rate of return will be equivalent to the expected value.

(b)

To determine

A person invests in mutual fund rather than in the money market.

(b)

Expert Solution

Explanation of Solution

In this case, the fund to invest will depend not only on the expected value of the return. However, it also depends on the riskiness of each finance and on how risk averse the consumer is.

Answer 6

Chapter 4, Problem 85E

(a)

To determine

The mutual fund will certainly yield a higher return than the money market.

(a)

Expert Solution

Explanation of Solution

In general, the mutual fund will not certainly yield the higher return than money market because there is a probability distribution association with the rate of return in the mutual fund. However, not all the rate of return will be equivalent to the expected value.

Answer 7

Chapter 4, Problem 85E

(a)

To determine

The mutual fund will certainly yield a higher return than the money market.

Answer 8

(a)

Expert Solution

Explanation of Solution

In general, the mutual fund will not certainly yield the higher return than money market because there is a probability distribution association with the rate of return in the mutual fund. However, not all the rate of return will be equivalent to the expected value.

Answer 9

(a)

Expert Solution

Answer 10

(a)

Expert Solution

Answer 11

Expert Solution

Answer 12

(b)

To determine

A person invests in mutual fund rather than in the money market.

(b)

Expert Solution

Explanation of Solution

In this case, the fund to invest will depend not only on the expected value of the return. However, it also depends on the riskiness of each finance and on how risk averse the consumer is.

Answer 13

(b)

To determine

A person invests in mutual fund rather than in the money market.

Answer 14

(b)

Expert Solution

Explanation of Solution

In this case, the fund to invest will depend not only on the expected value of the return. However, it also depends on the riskiness of each finance and on how risk averse the consumer is.