EXERCISE 2: Andy Hamish has come into an inheritance from his grandparents. He is attempting to decide among several investment alternatives. The return after one year is primarily dependent on the interest rate during the next year. The rate is currently 7%, and he anticipates it will stay the same or go up or down by at most 2 points. The various investment alternatives plus their returns ($10,000) given the interest rate changes are shown in the following table. Interest Rates Investments 5% 6% 7% 8% 9% Money market fund 2 3.1 4 4.3 5 Stock growth fund -3 -2 2.5 4 6 Bond fund 6 5 3 3 2 Government fund 4 3.6 3.2 3 2.8 Risk fund -9 -4.5 1.2 8.3 14.7 Savings bond 3 3 3.2 3.4 3.5 a. Determine the best investment using the following decision criteria. 1. Maximax 2. Maximin 3. Equally likely b. Assume that Andy, 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 year as follows: Interest Rate 5% 6% 7% 8% 9% Probability 0.2 0.3 0.3 0.1 0.1 Based on expected monetary value, determine the best investment decision