A stock market advisory service offers three investments portfolios for one of its customers. All portfolios...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A stock market advisory service offers three investments portfolios for one of its customers. All portfolios have the same investment cost. Portfolio A contains speculative stocks, which aim for capital gain through price appreciation. Portfolio B is made up of stocks of stable companies that pay good dividends overt the long run. Portfolio C comprises stocks with a moderate potential for growth and a moderate yield of dividends. The customer has enough money to invest in only one of these three portfolios for a period of one year. The net return on investments will depend on whether the economy during the period will be in a stage of inflation, recession, or depression. The net potential gains or losses are calculated as follows: STATES OF NATURE TABLE NUMBERS in ten-thousands: Inflation Recession Depression $ 90 $ 40 $60 Portfolie A $40 S-60 $ 35 $ 30 $ 30 $-10 ALTERNATIVES Portfolie B Portfolie C 1. What would be the decision according to (1) Maximax (optimism); (2) Maximin (pessimism); (3) Realism where a = .6; (4) Equal Likelihood; and, (5) Minimizing Regret? Be sure to show work and indicate the recommended alternative cach time. AFTER SHOWING ALL WORK, SUMMARIZE/RECAP: DMUU: Letter Answer Reason Perfect Optimism: MXMX Perfect Pessimism: MXMN Optimism at a = REALISM Equal Likelihood: EQL LK'HD Minimizing Regret: REGRET Overall DMUU: (Give Reasons!) A stock market advisory service offers three investments portfolios for one of its customers. All portfolios have the same investment cost. Portfolio A contains speculative stocks, which aim for capital gain through price appreciation. Portfolio B is made up of stocks of stable companies that pay good dividends overt the long run. Portfolio C comprises stocks with a moderate potential for growth and a moderate yield of dividends. The customer has enough money to invest in only one of these three portfolios for a period of one year. The net return on investments will depend on whether the economy during the period will be in a stage of inflation, recession, or depression. The net potential gains or losses are calculated as follows: STATES OF NATURE TABLE NUMBERS in ten-thousands: Inflation Recession Depression $ 90 $ 40 $60 Portfolie A $40 S-60 $ 35 $ 30 $ 30 $-10 ALTERNATIVES Portfolie B Portfolie C 1. What would be the decision according to (1) Maximax (optimism); (2) Maximin (pessimism); (3) Realism where a = .6; (4) Equal Likelihood; and, (5) Minimizing Regret? Be sure to show work and indicate the recommended alternative cach time. AFTER SHOWING ALL WORK, SUMMARIZE/RECAP: DMUU: Letter Answer Reason Perfect Optimism: MXMX Perfect Pessimism: MXMN Optimism at a = REALISM Equal Likelihood: EQL LK'HD Minimizing Regret: REGRET Overall DMUU: (Give Reasons!)
Expert Answer:
Answer rating: 100% (QA)
Maximax approach Max Max of three alternatives Max 904060 90 which corresponds to choice of p... View the full answer
Related Book For
Project Management A Managerial Approach
ISBN: 978-0470226216
7th Edition
Authors: Jack R. Meredith, Samuel J. Mantel,
Posted Date:
Students also viewed these general management questions
-
Given the production function is: q = 4L +4K, where L is the quantity of labor, K is the quantity of capital and q is the quantity of output. This production function exhibits: a. Constant returns to...
-
What would be the technical classification of the following turbo machines?
-
What would be the advantage, in Faradays experiments (Fig. 21-1), of using coils with many turns?
-
A standard "35-mm" slide measures 24.0 mm by 36.0 mm. Suppose a slide projector produces a 60.0-cm by 90.0-cm image of the slide on a screen. The focal length of the lens is 12.0 cm. (a) What is the...
-
Prepare the footnote required for Botburry Sheet Company in P19-9 for the current year that includes the following components of the pension disclosure: In P19-9 Botburry Sheet Company offers all...
-
Assume a company produces one product that sells for $55, has a variable cost per unit of $35, and has fixed costs of $100,000. How many units must the company sell to earn a target profit of...
-
How to obtain a dismissal of a lawsuit?
-
Houseco, an audit client of Jones, CPA, for the past five years, is a manufacturer of various household products. Approximately four years ago, Houseco developed a better toaster than had been...
-
Giants Inc. manufactures specialized precision electronic kits. In late March, Job Orders #0311 and #0322 were started. Estimated material costs were P90,000 for both orders (60% for #0311) while...
-
Prepare a federal income tax return based on the attached scenario and the second file which contains relevant tax forms provided by the client. If you struggle to read the attached forms clearly,...
-
Suppose a Cobb-Douglas Production function is given by the following: P(L, K) 10L0.84K0.16 = where Lis units of labor, K is units of capital, and P(L, K) is total units that can be produced with this...
-
Are Jews constantly subjected to snit-Semitism, whether "covertly or openly", in Herzel's estimation? Why does Herzel think the "rampart of Europe" should be planted in Palestine and not in Argentina?
-
Activity 1 Research information Competitors The key players of Travel Pillow include Tempur Sealy, Samsonite, SNI Today, Trtl , etc. The top five players of Travel Pillow account for approximately 8...
-
Visit the National Debts Clock website: https://www.usdebtclock.org Question 2: When the government goes into deficit spending, it has to borrow money to pay for the deficit. That borrowing adds to...
-
BagitUp Company manufactures paper bags. Consider the following selected data: Direct Materials Direct Labor Standards per Paper Bag 550 grams of input at $0.03 per gram 0.07 labor hours at $17 per...
-
Business Law Assignment: 2.) Accidents on the workplace: methods of treatment. b.) In your research paper, explore how different businesses handle such situations. Are these methods always legal?
-
Given that the prefrontal cortex is activated for both positive and negative emotions for younger and older adults, what might account for older adults increased reaction to negative emotions?
-
A bubble-point liquid feed is to be distilled as shown in Figure. Use the Edmister group method to estimate the mole-fraction compositions of the distillate and bottoms. Assume initial overhead and...
-
Discuss each of the four fundamental issues for potential conflict during the project formation stage.
-
Why do you suppose that the coordination of the various elements of the project is considered the most difficult aspect of project implementation?
-
Find (a) The AOA network and the critical path. (b) All event slacks. (c) Critical path to event D. (d) Critical path probability of completion in 14 days. (e) The effect if CD slips to 6 days; to 7...
-
Two springs in series support weight \(W\), as shown in Figure 2.62. If these springs are replaced by a single spring, find the equivalent stiffness as well as the period of oscillation. The solution...
-
A pendulum of mass \(m\) and mass moment of inertia \(I_{O}\) is suspended from a hinge, as shown in Figure 2.63. The center of gravity is located a distance \(h\) from the hinge. For small...
-
A bifilar pendulum of length \(2 a\) is suspended with two vertical strings, each of length \(l\), as shown in Figure 2.64. (Bifilar means fitted with or involving the use of two threads or wires.)...
Study smarter with the SolutionInn App