Use the following to answer the question(s) below.
As a result of the financial crisis in the fall of 2008, where the government intervened to help the economy, an investor was considering various strategies for her money and the estimated profits would depend on how successful the intervention would be in helping the economy. The estimated annual return for two different investment strategies are shown in the following table.
-Using the maximax approach, the investor should
A) choose 20% stocks 80% bonds
B) choose 80% stocks 20% bonds
C) choose 20% stocks 80% bonds if the economy rebounds
D) choose 80% stocks 20% bonds if the economy declines
E) put her money in her mattress

Question

Use the following to answer the question(s) below.
As a result of the financial crisis in the fall of 2008, where the government intervened to help the economy, an investor was considering various strategies for her money and the estimated profits would depend on how successful the intervention would be in helping the economy. The estimated annual return for two different investment strategies are shown in the following table. 
-Using the maximax approach, the investor should
A) choose 20% stocks 80% bonds 
B) choose 80% stocks 20% bonds 
C) choose 20% stocks 80% bonds if the economy rebounds 
D) choose 80% stocks 20% bonds if the economy declines 
E) put her money in her mattress

Quizplus · Accepted Answer

The maximax approach involves selecting the strategy with the highest possible return in the best-case scenario. In this case, the highest possible return is 25%, which can be obtained by investing 80% in stocks and 20% in bonds if the economy rebounds (as shown in the table). Therefore, the investor should choose option B.

Use the Following to Answer the Question(s) Below