An investor may invest in a high-risk stock with a return of $1,500 if the stock market goes up, $200 if the market remains the same, and -$1,000 if the market goes down. Alternatively, the investor may invest in a low-risk stock with a return of $1,000 if the market goes up, $250 if the market remains the same, and $0 if the market goes down. Another option for the investor is to invest in a savings account and receive a fixed return of $700. The investor does not know the probabilities of the market going up, remaining the same, and going down. 

Conduct the sensitivity analysis and prepare a graph that shows how the investor's decisions might be.

Answer rating: 100% (QA)

Sensitivity analysis involves examining how a decision changes based on variations in input paramete... View the full answer