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 15 5 -10 10 (a) Determine the optimal investment strategy for the Carringtons' investment of $100,000. (Round your answers to the nearest dollar.) stocks $ 16,667 83,333 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.) $ 666,667 X

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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
commodities
15
5
-10
10
(a) Determine the optimal investment strategy for the Carringtons' investment of $100,000. (Round your answers to the nearest dollar.)
stocks
$ 16,667
$ 83,333
(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.)
$ 666,667
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 commodities 15 5 -10 10 (a) Determine the optimal investment strategy for the Carringtons' investment of $100,000. (Round your answers to the nearest dollar.) stocks $ 16,667 $ 83,333 (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.) $ 666,667
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