An investor has $1000 to invest and is considering the four alternatives shown below.How well each investment does depends on the state of the economy.The payoff table is shown below. Based on the maximin criterion,which investment should be chosen?
A)Stock A
B)Stock B
C)Stock C
D)Money market

Question

An investor has $1000 to invest and is considering the four alternatives shown below.How well each investment does depends on the state of the economy.The payoff table is shown below.  Based on the maximin criterion,which investment should be chosen?
A)Stock A 
B)Stock B 
C)Stock C 
D)Money market

Quizplus · Accepted Answer

The maximin criterion suggests selecting the alternative with the highest minimum payoff. In this case, the minimum payoff for the money market investment is $200, which is higher than the minimum payoffs for the other investments. Therefore, the best choice based on the maximin criterion is the money market investment (option D).

An Investor Has $1000 to Invest and Is Considering the Four