A financial analyst considers three funds. The funds' estimated returns depend on future economic conditions - summarized by outcomes A, B, C, or D. The table lists the probabilities of these outcomes and each fund's expected return for each outcome.
(a) Which fund has the greatest expected monetary return?
(b) Comment on the appropriateness of the expected-value criterion.

Question

A financial analyst considers three funds. The funds' estimated returns depend on future economic conditions - summarized by outcomes A, B, C, or D. The table lists the probabilities of these outcomes and each fund's expected return for each outcome.
  (a) Which fund has the greatest expected monetary return?
(b) Comment on the appropriateness of the expected-value criterion.

Quizplus · Accepted Answer

The Answer of A financial analyst considers three funds. The funds' estimated returns depend on future economic conditions - summarized by outcomes A, B, C, or D. The table lists the probabilities of these outcomes and each fund's expected return for each outcome.
  (a) Which fund has the greatest expected monetary return?
(b) Comment on the appropriateness of the expected-value criterion.

A Financial Analyst Considers Three Funds