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Task2: Mr. X is thinking of investing $ 1000. The following payoff table shows his profit possibilities depending on different market conditions. The market may experience a big rise, small rise, small fall, and big fall. The corresponding probabilities are 0.3, 0.4, 0.2, and 0.1 respectively. Profit Investment options ($) Small rise (p = 0.4) Small fall (p Big rise (p = 0.3) Big fall (p = 0.1) = 0.2) Gold -100 100 300 Bond Market 250 200 -100 -150 Stock Market 500 250 -200 -600 Fixed Deposit 60 60 60 60 Find out where Mr. X would invest - 1. By following Maximin decision rule? 2. By following Minimax regret decision rule? 3. To maximize expected value of returms from his investment? 4. To minimize expected opportunity loss?

Task2: Mr. X is thinking of investing $ 1000. The following payoff table shows his profit possibilities depending on different market conditions. The market may experience a big rise, small rise, small fall, and big fall. The corresponding probabilities are 0.3, 0.4, 0.2, and 0.1 respectively. Profit Investment options ($) Small rise (p = 0.4) Small fall (p Big rise (p = 0.3) Big fall (p = 0.1) = 0.2) Gold -100 100 300 Bond Market 250 200 -100 -150 Stock Market 500 250 -200 -600 Fixed Deposit 60 60 60 60 Find out where Mr. X would invest - 1. By following Maximin decision rule? 2. By following Minimax regret decision rule? 3. To maximize expected value of returms from his investment? 4. To minimize expected opportunity loss?

College Algebra
College Algebra
10th Edition
ISBN:9781337282291
Author:Ron Larson
Publisher:Ron Larson
Chapter8: Sequences, Series,and Probability
Section8.7: Probability
Problem 3ECP: You toss two six-sided dice. What is the probability that the total of the two dice is 5?
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Task2: Mr. X is thinking of investing $ 1000. The following payoff table shows his profit possibilities depending on different market conditions. The market may experience a big rise, small rise, small fall, and big fall. The corresponding probabilities are 0.3, 0.4, 0.2, and 0.1 respectively. Profit Investment options ($) Big rise (p = 0.3) Small rise (p = 0.4) Small fall (p = 0.2) Big fall (p = 0.1) Gold -100 100 300 Bond Market 250 200 -100 -150 Stock Market 500 250 -200 -600 Fixed Deposit 60 60 60 60 Find out where Mr. X would invest - 1. By following Maximin decision rule? 2. By following Minimax regret decision rule? 3. To maximize expected value of returns from his investment? 4. To minimize expected opportunity loss?
Transcribed Image Text:Task2: Mr. X is thinking of investing $ 1000. The following payoff table shows his profit possibilities depending on different market conditions. The market may experience a big rise, small rise, small fall, and big fall. The corresponding probabilities are 0.3, 0.4, 0.2, and 0.1 respectively. Profit Investment options ($) Big rise (p = 0.3) Small rise (p = 0.4) Small fall (p = 0.2) Big fall (p = 0.1) Gold -100 100 300 Bond Market 250 200 -100 -150 Stock Market 500 250 -200 -600 Fixed Deposit 60 60 60 60 Find out where Mr. X would invest - 1. By following Maximin decision rule? 2. By following Minimax regret decision rule? 3. To maximize expected value of returns from his investment? 4. To minimize expected opportunity loss?
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