The probability distribution of a less risky expected return is more peaked than that of a riskier return.

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The probability distribution of a less risky expected return is more peaked than that of a riskier return.

The probability distribution of a less risky expected return is more peaked than that of a riskier return. What shape would the probability distribution be for (a) completely certain returns and (b) completely uncertain returns?

The probability distribution of a less risky expected return is more peaked than that of a riskier return. What shape would the probability distribution be for (a) completely certain returns and (b) completely uncertain returns?

Answer & Explanation (2)

part a
Explanation
As there would be no deviation in the rate of return, the probability line would only face straight up as it would never move from that rate.

Sample Response
The probability distribution shape of an investment with a completely certain return would be straight and vertical.

part b
Explanation
As there would be complete uncertainty in the rate of return, the probability line would only face straight and horizontal, as there would be infinite variability in the return.

Sample Response
The probability distribution shape of an investment with a completely certain return would be straight and horizontal.

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