Problem 59 of 7
Analyze risk using outcome distribution investing $10,000 in a startup with a 10% chance to return $100,000 and a 90% chance to return $0, versus investing $10,000 in a stable fund that guarantees $10,000 return.
Using a hint is okay. It just tells the trainer to give you a little more review.
Hidden until you reveal it.
compare variability and downside risk.
Hidden until you reveal it.
Compare variability and downside risk when expected values may be equal.
Enter your answer
Your answer is equivalent to the expected form.
Walkthrough
Full solution stays hidden until you ask for it.
1. Compare expected values if relevant.
2. Compare spread, worst-case outcomes, and probability of losses.
3. State how risk affects the decision.
Use the worked steps, then substitute the final answer back into the original relationship to confirm it satisfies the prompt.
Saying equal expected values make options equally desirable in all contexts.