Question
DIRECTION & REQUIREMENT/S Maya is considering investing some money that he inherited. The following payoff table gives the profits that would be realized during the
DIRECTION &
REQUIREMENT/S
Maya is considering investing some money that he inherited. The following payoff table gives the profits that would be realized during the next year for each of three investment alternatives Maya is considering:
State of Nature
Decision Alternative
Good Economy
Poor Economy
1- Stock Market
85,000
-10,000
2- Bonds
43,000
30,000
3- Cds
22,000
22,000
Probability
0.5
0.5
a. Calculate the EMV criterion.
b. Prepare the EVPI.
c. Develop the opportunity loss table for this situation. What decisions would be made using the minimum EOL criterion?
DIRECTION & REQUIREMENT/S
| Maya is considering investing some money that he inherited. The following payoff table gives the profits that would be realized during the next year for each of three investment alternatives Maya is considering:
a. Calculate the EMV criterion.
b. Prepare the EVPI.
c. Develop the opportunity loss table for this situation. What decisions would be made using the minimum EOL criterion?
|
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