help **Investment Strategy Analysis**The Carringtons aim to invest $100,000 in stock market investments and commodities. Their returns are contingent on the state of the economy. In an expanding economy, stock market investments are predicted to yield more returns than commodities. Conversely, during an economic recession, commodities perform better.The expected percentage change in value for each investment under different economic conditions is presented in the payoff matrix:| | Expanding Economy | Economic Recession ||----------------------------|-------------------|--------------------|| Stock Market Investment | 15% | -10% || Commodity Investment | 5% | 10% |**Analysis:**(a) **Optimal Investment Strategy:**For an initial investment of $100,000, the optimal allocation according to the matrix is:- **Stocks:** $16,667 - **Commodities:** $83,333 (b) **Expected Profit:**Using the optimal strategy, the Carringtons can expect a profit of:- **$6,666**Note: The calculations are rounded to the nearest dollar.

An optimal investment strategy is a plan of action that undertakes an analysis of cost and returns…

As part of their investment strategy, the Carringtons have decided to put $100,000 into stock market investments and also into purchasing precious metals. The performance of the investments depends on the state of the economy in the next year. In an expanding economy, it is expected that their stock market investment will outperform their investment in precious metals, whereas an economic recession will have precisely the opposite effect. Suppose the following payoff matrix gives the expected percentage increase or decrease in the value of each investment for each state of the economy. Stock market investment Commodity investment Expanding Economic economy recession 15 5 -10 10 (a) Determine the optimal investment strategy for the Carringtons' investment of $100,000. (Round your answers to the nearest dollar.) stocks $ 16,667 commodities $ 83,333 ✓ (b) What profit can the Carringtons expect to make on their investments over the year if they use their optimal investment strategy? (Round your answer to the nearest dollar.) $ 66,666 x

As part of their investment strategy, the Carringtons have decided to put $100,000 into stock market investments and also into purchasing precious metals. The performance of the investments depends on the state of the economy in the next year. In an expanding economy, it is expected that their stock market investment will outperform their investment in precious metals, whereas an economic recession will have precisely the opposite effect. Suppose the following payoff matrix gives the expected percentage increase or decrease in the value of each investment for each state of the economy. Stock market investment Commodity investment Expanding Economic economy recession 15 5 -10 10 (a) Determine the optimal investment strategy for the Carringtons' investment of $100,000. (Round your answers to the nearest dollar.) stocks $ 16,667 commodities $ 83,333 ✓ (b) What profit can the Carringtons expect to make on their investments over the year if they use their optimal investment strategy? (Round your answer to the nearest dollar.) $ 66,666 x

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Is higher education worth the investment ?
What are three ways that starting a new business helps the economy?
write a conclusion of the effectiveness of Human resources management and its importance on the economy and organizations.
how much a person or family earns in any given period is called
What part of the population are farmers and nomads in afghanistan
Within a foreign country, what perspectives must one consider?
What is the Times-Interest-Earned Ratio?
evaluate accelerate community development
How do employees adapt to their workplace environment?
Summerize Business Government and Consumer culture
A measure of the goods and services produced using labor and property in the us
What is not a means or medium of communication?