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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
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:
Interest Rate
Investment 5% 6% 7% 8% 9%
Money market fund 2 3.1 4 4.3 5
Stock growth fund -3 -2 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
(a=.4)
PROBLEMS 575
Determine the best investment, using the following decision criteria.
a. Maximax
b. Maximin
c. Equal likelihood
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