Questions 7 and8 the stock market in one year. three possible outcomes are summa
ID: 3325115 • Letter: Q
Question
Questions 7 and8 the stock market in one year. three possible outcomes are summarized in the follk STOCK The whar stay about the aof nature: he market down, choices to four stocks The proh stock to outcomes ao up. The hereare throwg to avest in. The wiasdot o r he et could go dow o different invester three possible s fits for the uat . The windom of the decision depends on the bot the narrowed the 2 3 Market down -10 Market up payoff table. The units are thousands of dollars Unchanged -15 15 20 10 100 8 -s0 7. sing the conservative decision making A) STOCK 1 B) STOCK 2 C) STOCK 3 D) STOCK 4 criterion, the investor should choose 8. What is the regret (lost be unchanged? t opportunity) to the investor if she chooses stock 2 and the market turns out to to A) -2 B) 0 C) 2 D) 3Explanation / Answer
7.
Looking at the table above, maximum of the minimum payoff values is in Stock 3 and hence in this case, we would choose stock 3. Hence, the correct answer is C.
8.
Looking at the opportunity loss table above, we can see that the correct answer would be 3. Hence, the correct answer is D.
Stock Market Up Unchanged Market Down Conservative 1 15 5 -10 -10 2 20 5 -15 -5 3 10 8 6 6 4 100 0 -50 -50Related Questions
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