ALTERNA TIVES Fi VL reason. Portfolio U Portfolio V Portfolio W Recessi on $25 $47 $50 .3 Inflatio n $75 $ 70 $80 5 TES OF N ATURE STA Depressi on $0 $-5 $-15 .2 1. DMUU: What would be the decision according to: (1) Maximax (optimism); (2) Maximin (pessimism); (3) R ealism where Alpha - α = 7 (4) Equal Likelihood; and (5) Minimizing Regret? Be sure to show work, indicate the recommended alternative each time, provide a summary. table (see below), and support your final statement with a

Practical Management Science
6th Edition
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Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
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A stock market advisory service offers three investments
portfolios for one of its customers. All portfolios have the
same investment cost. Portfolio U contains speculative stocks,
which aim for capital gain through price appreciation. Portfolio
V is made
up of stocks of stable companies that pay good
dividends overt the long run. Portfolio W comprises stocks
with a moderate potential for growth and a moderate yield of
dividends.
The customer has enough money to invest in only one of these
three portfolios for a period of one year. The net return on
investments will depend on whether the economy during the
period will be in a stage of inflation, recession, or
depression. The net potential gains or losses (in thousands)
are calculated follows:
as
Transcribed Image Text:A stock market advisory service offers three investments portfolios for one of its customers. All portfolios have the same investment cost. Portfolio U contains speculative stocks, which aim for capital gain through price appreciation. Portfolio V is made up of stocks of stable companies that pay good dividends overt the long run. Portfolio W comprises stocks with a moderate potential for growth and a moderate yield of dividends. The customer has enough money to invest in only one of these three portfolios for a period of one year. The net return on investments will depend on whether the economy during the period will be in a stage of inflation, recession, or depression. The net potential gains or losses (in thousands) are calculated follows: as
ALTERNA
TIVES
Fi
VL
reason.
Portfolio U
Portfolio V
Portfolio
W
Recessi
on
$25
$ 47
$50
.3
Inflatio
n
$75
$ 70
$ 80
TES OF N
ATURE
Depressi
on
STA
$0
$-5
$-15
.2
1. DMUU: What would be the decision according
to: (1) Maximax (optimism); (2) Maximin (pessímísm); (3) R
ealism where Alpha - α = .7 (4) Equal Likelihood;
and (5) Minimizing Regret? Be sure to show work, indicate
the recommended alternative each time, provide a summary.
table_(see below), and support your final statement with a
Be sure to show all work, indicate the recommended alternative
each time, provide a summary table (see below),
and support your final statement with a reason.
Transcribed Image Text:ALTERNA TIVES Fi VL reason. Portfolio U Portfolio V Portfolio W Recessi on $25 $ 47 $50 .3 Inflatio n $75 $ 70 $ 80 TES OF N ATURE Depressi on STA $0 $-5 $-15 .2 1. DMUU: What would be the decision according to: (1) Maximax (optimism); (2) Maximin (pessímísm); (3) R ealism where Alpha - α = .7 (4) Equal Likelihood; and (5) Minimizing Regret? Be sure to show work, indicate the recommended alternative each time, provide a summary. table_(see below), and support your final statement with a Be sure to show all work, indicate the recommended alternative each time, provide a summary table (see below), and support your final statement with a reason.
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