2. Jessica's rich maiden aunt died and left her a sizable inheritance. She thought about keeping...

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2. Jessica's rich maiden aunt died and left her a sizable inheritance. She thought about keeping her aunt's portfolio of investments just as she had left it since she ended up so rich, but Jessica realized that since her aunt was an old woman, she invested in more conservative instruments as she got older. Jessica is young and optimistic, so she thought she might try a more aggressive portfolio, particularly investing in new technologies. Her decision alternatives at this point are to keep the portfolio as is (D1), or to invest more aggressively (D2), even though that has greater risk, especially with inflation, the possibility of recession in the next year, and the war in Ukraine. She developed the following payoff table (in $1000s), with S1 and S2 the state of new technological developments being strong (S1) or weak (S2) in the coming year. Strong Weak Keep portfolio as is 70 Invest aggressively C. a. 100 b. 30 Find the highest return for each state of nature. Show your work. Calculate the regret table below. Use the table to calculate the minimax regret. What decision should Jessica make? -20 2. Jessica's rich maiden aunt died and left her a sizable inheritance. She thought about keeping her aunt's portfolio of investments just as she had left it since she ended up so rich, but Jessica realized that since her aunt was an old woman, she invested in more conservative instruments as she got older. Jessica is young and optimistic, so she thought she might try a more aggressive portfolio, particularly investing in new technologies. Her decision alternatives at this point are to keep the portfolio as is (D1), or to invest more aggressively (D2), even though that has greater risk, especially with inflation, the possibility of recession in the next year, and the war in Ukraine. She developed the following payoff table (in $1000s), with S1 and S2 the state of new technological developments being strong (S1) or weak (S2) in the coming year. Strong Weak Keep portfolio as is 70 Invest aggressively C. a. 100 b. 30 Find the highest return for each state of nature. Show your work. Calculate the regret table below. Use the table to calculate the minimax regret. What decision should Jessica make? -20

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To solve this problem we need to follow these steps a Find the highest return for each state of natu... View the full answer