Skewedness versus Kurtosis
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1. What is the difference between the "skewedness" of the distribution of a dataset and its "kurtosis"?
2. What is the expected value (EV) of an investment if there is a 20% chance of realizing a return of $20,000 or a 55% chance of realizing a return of $25,000, or there could be a loss of $15,000?
3. Which is the better purchase to make, a $12,000 Plotter that costs $250/year in supplies to operate but has a $2,000 salvage value, or a $9,250 plotter that costs $600 annually in supplies and has only a $500 salvage. Assume that the cost of money & risk is anticipated to be 5.5%, inflation is expected to be 2.5%, and both will last for 7-years.
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Solution Summary
The difference between skewedness and kurtosos is explained. A problem involving expected value of a stock is included. Also included is a problem that involves determining which purchase is the better one to make given salvage values and related information.
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1. What is the difference between the "skewedness" of the distribution of a dataset and its "kurtosis"?
Skewness is a measure of symmetry, or more precisely, the lack of symmetry. A distribution, or data set, is symmetric if it looks the same to the left and right of the center point. Kurtosis is a measure of whether the data are peaked or flat relative to a normal distribution. That is, data sets with high kurtosis tend to have a distinct peak near the mean, ...
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