Investments A, B, and C all have the following characteristics: A B C Expected Return 10%...

Investments A, B, and C all have the following characteristics:

	A	B	C
Expected Return	10%	10%	10%
Standard Deviation	8%	8%	8%
Skewness	1.5	0.4	-0.8
Excess Kurtosis	-0.6	0	1.2

For an investor who is most concerned about not losing principal, the best investment and the worst investment are likely to be, respectively:

A.) A the best and B the worst

B.) B the best and A the worst

C.) B the best and C the worst

D.) A the best and C the worst

Solutions

Expert Solution

B the best and C the worst

B has lowest skewness and kurtosis, so it is least risky, but C has highest kurtosis, it means many of the sample of expected return is extreme, which is risky

jeff jeffy answered 1 year ago

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