Question
Bill Webster is preparing to retire after working for 40 years. His company is giving him a lump sum compensation of $50,000 in addition to
Bill Webster is preparing to retire after working for 40 years. His company is giving him a lump sum compensation of $50,000 in addition to his regular pension. He is trying to decide how to invest this compensation.
At his current age of 65, Bill does not want to take too much risk, but he also wants a good return on investment. He has determined three different options: Company stock, mutual funds, or certificates of deposit.
Each of these investment options has different risks and returns. If he invests in company stock, Bill has a 25% chance that he will double his $50,000 and a 75% chance of losing half of that investment.
If he invests in mutual funds, Bill has a 50% chance of keeping his $50,000 with no additional gain and a 50% chance of making an additional $15,000.
If he goes for certificates of deposit, Bill has a 55% chance of tripling his $50,000 and a 45% chance of losing all $50,000.
Create an influence diagram on Bill's situation.
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