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An investor is considering purchasing one of three stocks. Stock A is regarded as conservative, stock...

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Advance Math

An investor is considering purchasing one of three stocks. StockA is regarded as conservative, stock B as speculative, and stock Cas highly risky. If the economic growth during the coming year isstrong, then stock A should increase in value by $3000, stock B by$6000, and stock C by $15,000. If the economic growth during thenext year is average, then stock A should increase in value by$2000, stock B by $2000, and stock C by $1000. If the economicgrowth is weak, then stock A should increase in value by $1000 andstocks B and C decrease in value by $3000 and $10,000,respectively.

(a) Give the pay off matrix for this problem and decide if thegame is strictly determined or not.

(b) What is the optimal strategy for the investor?

(c) What is the value or expected value of the game?

Answer & Explanation Solved by verified expert
4.0 Ratings (732 Votes)
a The following table is the pay off matrix in this problem we assume that the investor is playing against the economic growth which doesnt want to us to earn money wheras we want to earn as much as possible Stock A Stock B Stock C Strong 3000 6000 15000 Average 2000 2000 1000 Weak 1000 3000 10000 The investor can choose which stock to go for and    See Answer
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