Answered>Order 2560

 Consider investments A and B, which have distributions of rates of return as follows :

             A 

Probability  rate of return

 0.05            -5

0.1                0

0.35              5

0.35            10

0.1             15

.05             20

        B

probability      rate of return

0.02              -10

0.03              -5

0.05           0

0.60         10

0.20          15

0.10           20

a. If an investor defines failure as suffering a loss of more than 5%,determine the risk of failure of each asset.

b.. If an investor defines failure as earning less than a zero rate of return, which is riskier? Explain?