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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: Interest Rate Investment 5% 6% 7% 8% 9% Money market fund Stock growth fund Bond fund 2 3.1 4 4.3 5 -3 -2 2.5 4 6 5 3 3 Government fund 4 3.6 3.2 3 2.8 Risk fund -9 -4.5 1.2 8.3 14.7 3.5 Savings bonds 3 3 3.2 3.4 Determine the best investment, using the following decision criteria.

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: Interest Rate Investment 5% 6% 7% 8% 9% Money market fund Stock growth fund Bond fund 2 3.1 4 4.3 5 -3 -2 2.5 4 6 5 3 3 Government fund 4 3.6 3.2 3 2.8 Risk fund -9 -4.5 1.2 8.3 14.7 3.5 Savings bonds 3 3 3.2 3.4 Determine the best investment, using the following decision criteria.

A First Course in Probability (10th Edition)
A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
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In Problem 5, Ann Tyler, with the help of a financial newsletter and some library research, has been able to assign probabilities to each of the possible interest rates during the next year, as follows: Interest Rate (%) Probability 5 .2 6 .3 7 .3 8 .1 9 .1 Using expected value, determine her best investment decision.
Transcribed Image Text:In Problem 5, Ann Tyler, with the help of a financial newsletter and some library research, has been able to assign probabilities to each of the possible interest rates during the next year, as follows: Interest Rate (%) Probability 5 .2 6 .3 7 .3 8 .1 9 .1 Using expected value, determine her best investment decision.
5. 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. 51 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: Interest Rate Investment 5% 6% 7% 8% 9% Money market fund Stock growth fund 3.1 4 4.3 -3 -2 2.5 4 Bond fund 6. 3 3 Government fund 4 3.6 3.2 3 2.8 Risk fund -4.5 1.2 8.3 14.7 Savings bonds 3 3 3.2 3.4 3.5 Determine the best investment, using the following decision criteria. a. Maximax b. Maximin c. Equal likelihood
Transcribed Image Text:5. 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. 51 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: Interest Rate Investment 5% 6% 7% 8% 9% Money market fund Stock growth fund 3.1 4 4.3 -3 -2 2.5 4 Bond fund 6. 3 3 Government fund 4 3.6 3.2 3 2.8 Risk fund -4.5 1.2 8.3 14.7 Savings bonds 3 3 3.2 3.4 3.5 Determine the best investment, using the following decision criteria. a. Maximax b. Maximin c. Equal likelihood
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