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Note: Show details of your calculations in each part of the question. Use two decimals if needed. Investment advisors estimated the stock market returns for
Note: Show details of your calculations in each part of the question. Use two decimals if needed. Investment advisors estimated the stock market returns for four market segments: computers, financial, manufacturing, and pharmaceuticals. Annual return projections vary depending on whether the general economic conditions are improving, stable, or declining. The anticipated annual return percentages for each market segment under each economic condition are as follows: Assume that an individual investor wants to select one market segment for a new investment. A forecast shows stable to declining economic conditions with the following probabilities: Improving (0.15), stable (0.5), and declining (0.35). (a) What is the preferred market segment for the investors? What is the expected monetary value of your recommendation? ( 2 marks) (b) What is the maximum payment for hiring an expert and requesting additional information to make safer decisions? (2 marks) (c) What is the minimax regret of these scenarios? (2 marks)
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