In Problem 10, Ann Tyler, with the help of a financial newsletter and some library research, has been able to assign probabilities to each of the possible interest rates during the next year, as follows:Interest Rate (%) Probability5 ........ .26 ......... .37 ........ .38 ......... .19 ......... .1Using expected value, determine her best investment decision.
Chapter 12, Problems #21
In Problem 10, Ann Tyler, with the help of a financial newsletter and some library research, has been able to assign probabilities to each of the possible interest rates during the next year, as follows:
Interest Rate (%) Probability
5 ........ .2
6 ......... .3
7 ........ .3
8 ......... .1
9 ......... .1
Using expected value, determine her best investment decision.
Interest Rate (%) Probability
5 ........ .2
6 ......... .3
7 ........ .3
8 ......... .1
9 ......... .1
Using expected value, determine her best investment decision.
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Answer
EV(money market) = 2(.2) + 3.1(.3) + 4(.3) + 4.3(.1) + 5(.1) = 34,600; EV(stock grow…View the full answer
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