Question: Please solve in Excel and show formulas, thank you! Problem 3. Suppose that one of your friends has $2,000 available to invest. Assume that all

Please solve in Excel and show formulas, thank

Please solve in Excel and show formulas, thank you!

Problem 3. Suppose that one of your friends has $2,000 available to invest. Assume that all of this money must be placed in one of three investments: a particular money market fund, a stock, or gold. Each dollar your friend invests in the money market fund earns guaranteed 6% annual return. Each dollar he invests in the stock or gold earns an annual return characterized by the probability distribution provided in the template below. If your friend must place all of his available funds in a single investment, which investment should he choose to maximize his expected earnings over the next year, if there is $100 fixed fee for investing in gold? Create a decision tree to solve the problem. Input Data Amount available to invest Return on money market fund Distribution of Annual Returns for Given Stock Return Probability 0.10 -0.06 0.06 0.20 0.12 0.40 0.18 0.20 0.24 0.10 Distribution of Annual Returns for Gold Return Probability 0.10 0.20 -0.36 -0.12 0.12 0.36 0.40 0.20 0.60 0.10 Fixed fee for gold

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related General Management Questions!