An investor has a choice between four investments. The profitability of the investments depends upon the market. The payoff table is given below for different market conditions.
a.A market economist has stated that there is a 25% chance that the market will stay the same, a 35% chance that the market will decrease, and a 40% chance that the market will increase. Compute the expected value for each investment. Which investment is the best?
b.Compute the expected value of perfect information.

Question

An investor has a choice between four investments. The profitability of the investments depends upon the market. The payoff table is given below for different market conditions.  
a.A market economist has stated that there is a 25% chance that the market will stay the same, a 35% chance that the market will decrease, and a 40% chance that the market will increase. Compute the expected value for each investment. Which investment is the best?
b.Compute the expected value of perfect information.

Quizplus · Accepted Answer

The Answer of An investor has a choice between four investments. The profitability of the investments depends upon the market. The payoff table is given below for different market conditions.  
a.A market economist has stated that there is a 25% chance that the market will stay the same, a 35% chance that the market will decrease, and a 40% chance that the market will increase. Compute the expected value for each investment. Which investment is the best?
b.Compute the expected value of perfect information.

An Investor Has a Choice Between Four Investments