Please refer to the attachment.

Define first-order and second-order stochastic dominance. Illustrate the definitions by sketching cumulative distribution functions of two random variables which represent the returns on two investments, one of which dominates the other. [5] Explain how an investor's economic characteristics will affect his choice of an investment that: (a) first-order stochastically dominates another (b) second-order stochastically dominates another. [3] [Total 8]Consider an investment whose returns follow a continuous uniform distribution over the range 0% to 10% pa. Write down the probability density function for the investment returns, (ii) What is the mean investment return? (iii) Calculate the variance and semi-variance measures of investment risk. (iv) Calculate the shortfall probability and the expected shortfall based on a benchmark level of 3% pa.Consider two investments: Investment A offers an investment return of either -3%, +2% or +7% pa, whereas Investment B offers -5% o. +20% 2% or +3% pa. In each case the probability of each possible outcome is one third. Which is the riskier investment according to each of the following measures of investment risk? variance shortfall probability (with a benchmark of 0% pa) expected shortfall (with a benchmark of 0% pa)An investor is contemplating an investment with a return of ( R, where: R =300,000 - 500, OOOU where U is a uniform [0.1] random variable. Calculate each of the following four measures of risk: (a) variance of return (b) downside semi-variance of return (c) shortfall probability, where the shortfall level is $1 00,000 (d) Value at Risk at the 5% level