The correct answer is: C. more peaked distribution.
A probability distribution is a graphical representation of the possible outcomes of an event and their associated probabilities. The expected value of a probability distribution is the average of the possible outcomes, weighted by their probabilities.
A more peaked distribution is one in which the possible outcomes are more concentrated around the expected value. This means that there is a smaller chance of extreme outcomes, and a higher chance of outcomes that are close to the expected value.
A less peaked distribution is one in which the possible outcomes are more spread out. This means that there is a higher chance of extreme outcomes, and a lower chance of outcomes that are close to the expected value.
In the context of probability distributions of rates of return, a close outcome to an expected value is shown by a more peaked distribution. This is because a more peaked distribution indicates that the possible outcomes are more concentrated around the expected value, and there is a smaller chance of extreme outcomes.