3-16 Debbie Gibson is considering three investment options for a small inheritance that she has just received-stocks, bonds, and money market. The return on her investment will depend on the per- formance of the economy, which can be strong, average, or weak. The returns for each possible combination are shown in the following table: INVESTMENT STRONG 12% 7% 4% Stocks Bonds Money market AVERAGE 6% 4% 3% WEAK -10% 1% 2% Assume that Debbie will choose only one of the investment options. (a) Which investment should Debbie choose if she uses the maximax criterion? (b) Which investment should Debbie choose if she uses the maximin criterion? (c) Which investment should Debbie choose if she uses the equally likely criterion? (d) Which investment should Debbie choose if she uses the criterion of realism with a = 0.5? (e) Which investment should Debbie choose if she uses the minimax regret criterion?

3-16 Debbie Gibson is considering three investment options for a small inheritance that she has just received-stocks, bonds, and money market. The return on her investment will depend on the per- formance of the economy, which can be strong, average, or weak. The returns for each possible combination are shown in the following table: INVESTMENT STRONG 12% 7% 4% Stocks Bonds Money market AVERAGE 6% 4% 3% WEAK -10% 1% 2% Assume that Debbie will choose only one of the investment options. (a) Which investment should Debbie choose if she uses the maximax criterion? (b) Which investment should Debbie choose if she uses the maximin criterion? (c) Which investment should Debbie choose if she uses the equally likely criterion? (d) Which investment should Debbie choose if she uses the criterion of realism with a = 0.5? (e) Which investment should Debbie choose if she uses the minimax regret criterion?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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