Financial Mathematics Text

Thursday, July 18, 2013

Poll: Which of these investment options do you prefer?

So the following is a poll I'd like to conduct. Feel free to post thoughts on your reasoning. I'll present three investment alternatives. Your job is to order them by preference.

All of the scenarios have an expected value (return) of 3% and all have a volatility of 4%.

They are all Bernoulli trials in that there are only 2 possible outcomes. They differ both in the probabilities and the returns (or losses) for each possible outcome.

Scenario A:

50% Chance of 7.00% Return
50% Chance of -1.00% Return (1% Loss)

Scenario B:

10% Chance of 15.00% Return
90% Chance of 1.67% Return

Scenario C:

90% Chance of 4.33% Return
10% Chance of -9.00% Return (9% Loss)

If you have a distinct preference select the one option that fits your preference. If you are indifferent to two alternatives you can select both.

Example: Suppose you like option A the best but are indifferent between B and C. You could select both: A > B > C and A > C > B.

Feel free to offer comments on why you have the preferences you do.
Which of these investment alternatives do you prefer?
  free polls 


  1. B is the only scenario where no loss is possible--a great outcome, but not very realistic since numerous factors can drive a stock down.(Buying a solid value stock at a depressed price for a margin of safety is probably the closest to scenario B). A is like a high yield foreign dividend stock with irregular payouts. C is like a moderate growth stock. My portifolio has a mix of value and growth.

  2. @Lemoneater,

    Interesting comparisons.

  3. Thank you for the fun poll. Have a great weekend!


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