Question: *needs to be done in excel and please show formulas A brokerage firm is considering investment options for its clients. If the market is good
A brokerage firm is considering investment options for its clients. If the market is good the clients could get a net profit of $110,000 for Fund X, $120,000 for Fund Y, and $70,000 for Fund Z. If the market is fair, they could get a net profit of $50,000 for Fund X, $40,000 for Fund Y, and $30,000 for Fund Z. If the market is poor, clients would lose $40,000 for Fund X, $50,000 for Fund y, and 10,000 for Fund Z. They must Fund one to invest in for their clients. An economist group offers to do a market study for $2,000. They know the following probabilities: elgood market Fund X favorable study) = 0.6 Pffair market Fund X favorable study) = 0.2 P(poor market Fund X | favorable study) = 0.2 elgood market Fund X | unfavorable study) = 0.1 Pffair market Fund X | unfavorable study) = 0.3 P(poor market Fund X | unfavorable study) = 0.6 Plgood market Fund Y | favorable study) = 0.7 P{fair market Fund Y | favorable study) = 0.2 epoor market Fund Y | favorable study) = 0.1 Pgood market Fund Y | unfavorable study) = 0.1 e{fair market Fund Y | unfavorable study) = 0.4 Ppoor market Fund Y unfavorable study) = 0.5 elgood market Fund z favorable study) = 0.8 e{fair market Fund z favorable study) = 0.1 epoor market Fund z favorable study) = 0.1 Plgood market Fund Zunfavorable study) = 0.2 Pffair market Fund 2 | unfavorable study) = 0.4 epoor market Fund 2 unfavorable study) = 0.4 P (favorable study) = 0.6 P(good market) = 0.4 P (fair market) = 0.3 P(poor market) = 0.3 a. Calculate EMVs and draw a decision tree (20 pts) b. Write out the recommended strategy (2 pts) c. Calculate EVSI for how much the brokerage firm would be willing to pay for the research study (3 pts)
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