Question: You are considering three different investment options (d 1 - buy oil stocks, d 2 - buy online tech stocks, and d 3 - place

You are considering three different investment options (d₁ - buy oil stocks, d₂ - buy online tech stocks, and d₃ - place money in a GIC). How each investment will perform depends on how long the COVID-19 situation persists. If it goes on for a long time (s₂), oil stocks will continue to do very poorly (payoff of -10000), while online tech stocks will do well (payoff of 28000); the situation is reversed if the outbreak resolves quickly (s₁) (payoff of 32000 for oil and -12000 for tech). The return for the GIC, being 'guaranteed', is not random (payoff of 115000). You have estimated the probability of a quick end P(s₁) = 0.37, while P(s₂) = 0.63.

Using the tree, determine the best investment choice using the EMV criterion.

What is the EMV for node 2?

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