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(a) Determine the optimal investment strategy for the Carringtone investment of $100,000. (Round your answers to the nearest dollar) $05300 commodities (b) What profit can the Carringtons expect to make on their investments over the year if they use their optimal investment strategy? (Round your answer to the nearest dollar) $1000 x

(a) Determine the optimal investment strategy for the Carringtone investment of $100,000. (Round your answers to the nearest dollar) $05300 commodities (b) What profit can the Carringtons expect to make on their investments over the year if they use their optimal investment strategy? (Round your answer to the nearest dollar) $1000 x

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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As part of their investment strategy, the Carringtons have decided to put $100,000 into stock market investments and also into purchasing precious metals. The performance of the investments depends on the state of the economy in the next year. In an expanding economy, it is expected that their stock market investment will outperform their investment in precious metals, whereas an economic recession will have precisely the opposite effect. Suppose the following payoff matrix gives the expected percentage increase or decrease in the value of each investment for each state of the economy Stock market investment Commodity investment Expanding Economic economy recession 30 15 20 (a) Determine the optimal investment strategy for the Carringtons investment of $100,000. (Round your answers to the nearest dollar) stocks $00300 $34700 commodities (b) What profit can the Carringtons expect to make on their investments over the year if they use their optimal investment strategy? (Round your answer to the nearest dollar), $10600 x
Transcribed Image Text:As part of their investment strategy, the Carringtons have decided to put $100,000 into stock market investments and also into purchasing precious metals. The performance of the investments depends on the state of the economy in the next year. In an expanding economy, it is expected that their stock market investment will outperform their investment in precious metals, whereas an economic recession will have precisely the opposite effect. Suppose the following payoff matrix gives the expected percentage increase or decrease in the value of each investment for each state of the economy Stock market investment Commodity investment Expanding Economic economy recession 30 15 20 (a) Determine the optimal investment strategy for the Carringtons investment of $100,000. (Round your answers to the nearest dollar) stocks $00300 $34700 commodities (b) What profit can the Carringtons expect to make on their investments over the year if they use their optimal investment strategy? (Round your answer to the nearest dollar), $10600 x
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