Logo
Home Study Material Contact Search
AI Chat FREE
  1. mathematics
  2. basic math
  3. an investor has a certain amount of money availabl

An investor has a certain amount of money available to invest now. Three alternative investments are...

80.2K

Verified Solution

Question

Basic Math

An investor has a certain amount of money available to investnow. Three alternative investments are available. The estimatedprofits ($) of each investment under each economic condition areindicated in the following payoff table:

INVESTMENT SELECTION

EVENT A B C

Economy declines 500 -2000 -7000

No change 1000 2000 -1000

Economy expands 2000 5000 20000

Based on his own past experience, the investor assigns thefollowing probabilities to each economic condition:

P (Economy declines) = 0.30

P (No change) = 0.50

P (Economy expands) = 0.20

a. determine the optimal action based on the maximaxcriterion.

b. determine the optimal action based on the maximincriterion.

c.compute the the expected monetary value for eachinvestment

d. compute the expected opportunity loss for each investment

e. based on (c) or (d) which investment would you choose, andwhy?

Answer & Explanation Solved by verified expert
3.6 Ratings (657 Votes)
    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Biology
1.2K views

6.) In the 1952 Hershey-Chase experiment showed that DNA is the genetic material of bacteriophage. Explain...

Advance Math
1.2K views

Given the following periodic function; ?(?) = ?, 0 ? ? < 1 ?(??1)=?(?), ??1 i. Sketch...

Biology
1.2K views

7 Rheumatoid Arthritis usually affects joints bilaterally i e both the right and left wrist...

Physics
1.2K views

What must be the minimum initial speed of the dart so that the combination makes...

Physics
1.2K views

Statement A Work done by frictional force is always negative Statement B A body at...

Physics
1.2K views

Two logic circuits are shown in the figure A a BB The logic operation carried...

Geometry
1.2K views

Question 7 How many degrees would an equilateral triangle need to carry it onto itself...

Statistics
1.2K views

Lifetimes of AAA batteries are approximately normally distributed A manufacturer wants to estimate the standard...

Calculus
1.2K views

3 Bluegill Population There are 1100 bluegill in Lake Tawaga at present Year 0 Each...

Algebra
1.2K views

8 TB MC Qu 08 103 Static Plerce Corporatio Pierce Corporation a U S business...

Accounting
1.2K views

Bank Reconciliation The bank reconciliation made by Winton, Inc., on August 31 showed: ...

Accounting
1.2K views

Your classmate asserts, "Accountants should not need to take business courses besides accounting, because they...