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Consider the following two assets, each costing $500, with the probabilities of return and payoffs illustrated in the following table. Construct a chart for each
Consider the following two assets, each costing $500, with the probabilities of return and payoffs illustrated in the following table. Construct a chart for each asset illustrating the probabilities on the vertical axis. Which asset carries more risk? How can you tell?
Asset A | Asset B | ||||
Probability | Payoff | Probability | Payoff | ||
0.50 | $1,000 | 0.02 | $100 | ||
0.50 | $2,000 | 0.48 | $1,000 | ||
0.48 | $2,000 | ||||
0.02 | $2,900 | ||||
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