45. Suppose that an investor has a choice of four investments (assume that he must choose one,...
Question:
45. Suppose that an investor has a choice of four investments (assume that he must choose one, and only one, of the four—he cannot divide his money among them):
A: a savings account in a bank.
B: a stock which moves counter to the general stock market.
C: a growth stock wThich moves at a faster pace than the market.
D: a second growth stock which is similar to C but not quite as speculative.
The investor has decided that his payoff depends on his choice of investment and on the next year’s change in the Dow-Jones Industrials (DJI), which we shall call 0. (Ignore the fact that he should be interested in the change in price of the investments themselves—for example, by assuming perfect cor¬
relations between the DJI and the investments). His payoff functions are as follows:
Step by Step Answer:
Statistics Probability Inference And Decision
ISBN: 9780030778056
1st Edition
Authors: Robert L. Winkler, William L. Hays