Comparing investment success probabilities
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Investment A has an expected return of $25 million and B has an expected return if $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 chance of getting at least $40 million return? Explain. (b)How could your answer to part (b) How could you answer to part (a) change if you knew returns followed a skewed distribution instead of a normal distribution? Explain briefly.
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This 400 word solution shows how to compare the success probabilities of the competing investments in part a assuming normal distributions and in part b assuming skewed distributions.
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This 400 word solution shows how to compare the success ...
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