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.
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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