Debbie Gibson is considering three investment options for a small inheritance that she has just received-stocks, bonds, and money market. The return on her investment will depend on the performance of the economy, which can be strong, average, or weak. If the market is strong her returns are 9% for stocks, 6% for bonds and 4% for money market. If the market is average her returns are 5% for stocks, 4% for bonds and 6% for money market. If the market is weak her returns are -7% for stocks, 2% for bonds and 1% for money market. (Round values to the nearest hundredths of a percent). a) Create a decision table and a decision tree. b) Which investment should Debbie choose if she uses the maximax criterion? What are the returns? c) Which investment should Debbie choose if she uses the maximin criterion? What are the returns? d) Which investment should Debbie choose if she uses the equally likely criterion? What are the returns? e) Which investment should Debbie choose if she uses the criterion of realism with α = 0.35? What are the returns? f) Which investment should Debbie choose if she uses the minimax regret criterion? What is the regret?
Debbie Gibson is considering three investment options for a small inheritance that she has just received-stocks, bonds, and
a) Create a decision table and a decision tree.
b) Which investment should Debbie choose if she uses the maximax criterion? What are the returns?
c) Which investment should Debbie choose if she uses the maximin criterion? What are the returns?
d) Which investment should Debbie choose if she uses the equally likely criterion? What are the returns?
e) Which investment should Debbie choose if she uses the criterion of realism with α = 0.35? What are the returns?
f) Which investment should Debbie choose if she uses the minimax regret criterion? What is the regret?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 6 images
