Suppose that the following two bonds have the same characteristics except that
a. Bond 1 yields a rate of return of 8% with probability 0.2 and a rate of return of 2% with probability 0.8.
b. Bond 2 always yields a rate of return of 3.2%
If you are a risk-averse person, which bond should you prefer? Calculate the variance and the expected return for each bond to explain your answer.