An investor has $100,000 available for 1-year investment. The investor is weighing two options: a money market fund that gives a fixed annual return of 12% and an investment plan with an annual rate of return that can be regarded as a random variable with values that depend on prevailing economic conditions. Based on the second plan’s past history under a variety of economic conditions, a very reliable analyst has subjectively determined the following probabilities associated with several possible rates of return: Rate of Return Probability 0.3 0.20 0.25 0.20 0.20 0.30 0.15 0.10 0.10 0.10 0.05 0.10 a) Which investment plan should be selected, if the choice is to be made on the expected rate of return? Show work.
Unitary Method
The word “unitary” comes from the word “unit”, which means a single and complete entity. In this method, we find the value of a unit product from the given number of products, and then we solve for the other number of products.
Speed, Time, and Distance
Imagine you and 3 of your friends are planning to go to the playground at 6 in the evening. Your house is one mile away from the playground and one of your friends named Jim must start at 5 pm to reach the playground by walk. The other two friends are 3 miles away.
Profit and Loss
The amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item.
Units and Measurements
Measurements and comparisons are the foundation of science and engineering. We, therefore, need rules that tell us how things are measured and compared. For these measurements and comparisons, we perform certain experiments, and we will need the experiments to set up the devices.
An investor has $100,000 available for 1-year investment. The investor is weighing two options: a money market fund that gives a fixed annual return of 12% and an investment plan with an annual rate of return that can be regarded as a random variable with values that depend on prevailing economic conditions. Based on the second plan’s past history under a variety of economic conditions, a very reliable analyst has subjectively determined the following probabilities associated with several possible rates of return:
Rate of Return Probability
0.3 0.20
0.25 0.20
0.20 0.30
0.15 0.10
0.10 0.10
0.05 0.10
a) Which investment plan should be selected, if the choice is to be made on the expected rate of
return? Show work.
An investor has $100,000 for investment.
There are two investment options.
1. money market fund gives fixed annual return 12%
2. Investment plan based on random phenomena.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
