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Hamad studied finance at Al Ain University last semester. He is considering investing some money that he inherited. The following payoff table gives the profits
Hamad studied finance at Al Ain University last semester. He 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 the three investment alternatives he is considering: STATE OF NATURE DECISION GOOD POOR ALTERNATIVE ECONOMY ECONOMY Stock market 100,000 -30,000 Bonds 40,000 30,000 CDs 30,000 30,000 If the probability of a good economy is 50% answer the following: (a) What decision would maximize expected profits? (b) What is the maximum amount that should be paid for a perfect forecast of the economy? (d) What decision would minimize the expected opportunity loss? What is the minimum EOL
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