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Investment A has an expected return of $25 million and Investment B has an expected return of $5 million.
Investment A has an expected return of $25 million and Investment B has an expected return of $5 million. Market risk analysts believe the standard deviation of the return from A is $10 million, and for B is $30 million (negative returns are possible here). (a) If you assume returns follow a normal distribution, which investment would give a better change of getting at least a $40 million return? Explain. (b) How could your answer to part (a) change if you knew returns followed a skewed distribution instead of a normal distribution? Explain briefly.
