Question
The following problem is adapted from David C. Skinner, Introduction to Decision Analysis (Florida: Probabilistic Publishing, 1996). Suppose you wish to invest $1000 for a
The following problem is adapted from David C. Skinner, Introduction to Decision Analysis (Florida: Probabilistic Publishing, 1996). Suppose you wish to invest $1000 for a year. You have three choices: a mutual fund, a management company, or a CD. Each of the investments may have a high or a low yield. Mutual funds return 68%, management companies 58%, and CDs 14%.
(a) Make a tree diagram showing all possibilities. Write the amount of money expected from the investment at the end of each branch.
mutual fund, high yield | $ |
mutual fund, low yield | $ |
management company, high yield | $ |
management company, low yield | $ |
CD, high yield | $ |
CD, low yield | $ |
(b) Based on your tree diagram, what is the highest value for the investment? $ (c) Based on your tree diagram, what is the lowest value for the investment?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started