# On Monday, a certain stock closed at $10 per share. On Tuesday, you expect the stock to

## Question:

On Tuesday, you are directed to buy 100 shares of the stock before Thursday. All purchases are made at the end of the day, at the known closing price for that day, so your only options are to buy at the end of Tuesday or at the end of Wednesday. You wish to determine the optimal strategy for whether to buy on Tuesday or defer the purchase until Wednesday, given the Tuesday closing price, to minimize the expected purchase price. Develop and evaluate a decision tree by hand for determining the optimal strategy.

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**Related Book For**

## Introduction to Operations Research

**ISBN:** 978-1259162985

10th edition

**Authors:** Frederick S. Hillier, Gerald J. Lieberman