Question

The anticipated annual return for a $1000 investment in either of two shares is summarized in the probability distributions below:

Return from A ($)	-100	0	60	140
Return from B ($)	-50	40	40	50
Probability	0.1	0.3	0.5	0.1

Calculate the expected return from each investment.      

Other than expected value, what else might be important in comparing the shares?

Answer 1

Expected return for A is $34 .

Expected return for B is $32.

Other than expected value, comparimg the variance (standard deviation) is might be important because for investment A shares spread or vary much i.e. from -100 to 140 and that for investment B shares spread less i.e. from -50 to 50.