A stock market advisory service offers three investments portfolios for one of its customers. All portfolios...

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A stock market advisory service offers three investments portfolios for one of its customers. All portfolios have the same investment cost. Portfolio A contains speculative stocks, which aim for capital gain through price appreciation. Portfolio B is made up of stocks of stable companies that pay good dividends overt the long run. Portfolio C comprises stocks with a moderate potential for growth and a moderate yield of dividends. The customer has enough money to invest in only one of these three portfolios for a period of one year. The net return on investments will depend on whether the economy during the period will be in a stage of inflation, recession, or depression. The net potential gains or losses are calculated as follows: STATES OF NATURE TABLE NUMBERS in ten-thousands: Inflation Recession Depression $ 90 $ 40 $60 Portfolie A $40 S-60 $ 35 $ 30 $ 30 $-10 ALTERNATIVES Portfolie B Portfolie C 1. What would be the decision according to (1) Maximax (optimism); (2) Maximin (pessimism); (3) Realism where a = .6; (4) Equal Likelihood; and, (5) Minimizing Regret? Be sure to show work and indicate the recommended alternative cach time. AFTER SHOWING ALL WORK, SUMMARIZE/RECAP: DMUU: Letter Answer Reason Perfect Optimism: MXMX Perfect Pessimism: MXMN Optimism at a = REALISM Equal Likelihood: EQL LK'HD Minimizing Regret: REGRET Overall DMUU: (Give Reasons!) A stock market advisory service offers three investments portfolios for one of its customers. All portfolios have the same investment cost. Portfolio A contains speculative stocks, which aim for capital gain through price appreciation. Portfolio B is made up of stocks of stable companies that pay good dividends overt the long run. Portfolio C comprises stocks with a moderate potential for growth and a moderate yield of dividends. The customer has enough money to invest in only one of these three portfolios for a period of one year. The net return on investments will depend on whether the economy during the period will be in a stage of inflation, recession, or depression. The net potential gains or losses are calculated as follows: STATES OF NATURE TABLE NUMBERS in ten-thousands: Inflation Recession Depression $ 90 $ 40 $60 Portfolie A $40 S-60 $ 35 $ 30 $ 30 $-10 ALTERNATIVES Portfolie B Portfolie C 1. What would be the decision according to (1) Maximax (optimism); (2) Maximin (pessimism); (3) Realism where a = .6; (4) Equal Likelihood; and, (5) Minimizing Regret? Be sure to show work and indicate the recommended alternative cach time. AFTER SHOWING ALL WORK, SUMMARIZE/RECAP: DMUU: Letter Answer Reason Perfect Optimism: MXMX Perfect Pessimism: MXMN Optimism at a = REALISM Equal Likelihood: EQL LK'HD Minimizing Regret: REGRET Overall DMUU: (Give Reasons!)

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Maximax approach Max Max of three alternatives Max 904060 90 which corresponds to choice of p... View the full answer