Question
You are considering three investment options for some extra income : Bonds (A 1 ) , Stocks (A 2 ), and Certificate of Deposit (A
You are considering three investment options for some extra income : Bonds (A1) , Stocks (A2), and Certificate of Deposit (A3). You expect the state of the economy to be either solid growth N1, recession N2 ,or Inflation N3 , and you expect probability of each each to be p1=0.4, p2=0.3,and p3=0.3. Outcomes for the three alternatives are : (1) 12k for solid growth, 6k for recession, and 3k for inflation. (2) 15k for solid growth, (-2k) for recession, 4k for inflation. (3) 4.5k solid growth, 4.5 for recession, 4.5 for inflation
B) Prepare a decision tree and recommend the best alternative
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