Three investors are considering the same investments. The net returns from the investments depend on the state
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Three investors are considering the same investments. The net returns from the investments depend on the state of the economy and are illustrated as follows:
Details on the attitudes to risk of the three investors is as follows:
- Micah is risk neutral
- Zhang is a risk seeker
- Jill is risk averse and typically follows a minimax regret strategy with her investments.
Calculate which investment would be best suited to each investor's risk attitude.
Transcribed Image Text:
State of the economy Returns from investment Probability of economic state AS A B C $ $ $ Good 6,000 14,000 3,000 0.1 Fair 5,000 3,000 5,000 0.4 Poor 4,000 500 8,000 0.5
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