Question: Using the Decision Tree WITHOUT information, create a fourth alternative in the initial decision node, calling it Purchase Information. Copy the Decision Tree WITH perfect
Using the Decision Tree WITHOUT information, create a fourth alternative in the initial decision node, calling it "Purchase Information". Copy the Decision Tree WITH perfect information and paste it into the "Purchase Information" alternative created in the Decision Tree without information. Test the Decision Tree by changing the probability of market up, flat, and down as follows: P(Market Up)=0.491, P(Market Flat) = 0.307, and P(Market Down) = 1-P(Market Up)-P(Market Flat). What is the Value of Perfect Information in terms of dollars and cents. (ie. Dollars, accurate to two decimal points.) a high-risk stock - $200 brokerage fee Payoff- $1700 if the market goes up $300 if market stays neutral -$800 if the market goes down a low-risk stock - $200 brokerage fee Payoff- $1200 if the market goes up $400 if market stays neutral $100 if the market goes down a savings account that pays a sure $500
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