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Business
Operations Management
Interest Rate Investment 5% 6% 7% 8% 9% Money market fund Stock growth fund 2 3.1 -2 4 4.3 5 -3 2.5 4 6. Bond fund 6 5 3 3 2 Government fund 4 3.6 3.2 3 2.8 Risk fund -9 -4.5 1.2 8.3 14.7 Savings bonds 3 3 3.2 3.4 3.5

Interest Rate Investment 5% 6% 7% 8% 9% Money market fund Stock growth fund 2 3.1 -2 4 4.3 5 -3 2.5 4 6. Bond fund 6 5 3 3 2 Government fund 4 3.6 3.2 3 2.8 Risk fund -9 -4.5 1.2 8.3 14.7 Savings bonds 3 3 3.2 3.4 3.5

Foundations of Business - Standalone book (MindTap Course List)
Foundations of Business - Standalone book (MindTap Course List)
4th Edition
ISBN:9781285193946
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Chapter15: Using Management And Accounting Information
Section: Chapter Questions
Problem 4DQ
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Question

Ann Tyler has come into an inheritance from her grandparents. She is attempting to decide
among several investment alternatives. The return after 1 year is primarily dependent on the
interest rate during the next year. The rate is currently 7%, and Ann anticipates that it will stay
the same or go up or down by at most two points. The various investment alternatives plus
their returns ($10,000s), given the interest rate changes, are shown in the following table: Determine the best investment, using the following decision criteria.
a. Maximax
b. Maximin
c. Equal likelihood 

Interest Rate Investment 5% 6% 7% 8% 9% Money market fund Stock growth fund 2 3.1 -2 4 4.3 5 -3 2.5 4 6. Bond fund 6 5 3 3 2 Government fund 4 3.6 3.2 3 2.8 Risk fund -9 -4.5 1.2 8.3 14.7 Savings bonds 3 3 3.2 3.4 3.5
Transcribed Image Text:Interest Rate Investment 5% 6% 7% 8% 9% Money market fund Stock growth fund 2 3.1 -2 4 4.3 5 -3 2.5 4 6. Bond fund 6 5 3 3 2 Government fund 4 3.6 3.2 3 2.8 Risk fund -9 -4.5 1.2 8.3 14.7 Savings bonds 3 3 3.2 3.4 3.5
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