1. An investor has K 1 100 which he could invest in stocks of either of three companies: KC, RM and TE. If he invests in KC and there is a bull market, the stock would double to K2 400 but could drop to K1 000 in a bull market. If he invests in RM the payoff would be K2 200 in a bull market and K1 100 in bear market. Investing in TE payoffs would be K1 900 and K1 150 respectively. The probability of a market rise is 0.60.

Advise the investor as to which stocks he should invest in.

Construct an opportunity loss table for this scenario and determine the expected opportunity for each course of action. What is the least regret decision?

Apply the maximax, Maximin and minimax strategies for the above scenario.

Analyse this decision scenario using a decision tree