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You would like to invest in one of the three available investment plans: money market, bonds, or stocks. The payoffs (profits) of each plan under
You would like to invest in one of the three available investment plans: money market, bonds, or stocks. The payoffs (profits) of each plan under two possible future economic conditions, Poor Economy and Good Economy, are shown below. The probability of the occurrence of a Poor Economy is 0.3.
Decision | Poor Economy
| Good Rconomy |
Money Market | 3000 | 3200 |
Bonds | 2800 | 3500 |
Stocks. | 1500 | 3800 |
- ??Develop a Decision Tree and calculate the EMV (Expected Monetary Value) for each decision alternative.
- ??Which decision alternative is best according to the Decision Tree and EMV analysis?
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