1. An investor plans to put RM50 000 in one of four investments. The return on each investment depends on whether next year’s economy is strong or weak. TABLE 3 summarizes the possible payoffs (in RM) for the four investments.

 

 

TABLE 3

 

Next year’s economy

Investment

Strong

Weak

Certificate of deposit

6 000

6 000

Office complex

15 000

5 000

Land speculation

33 000

-17 000

Technical school

5 500

10 000

 

Let V, W, X, and Y denote the payoffs for the certificate of deposit, office complex, land speculation, and technical school, respectively. Then V, W, X, and Y are random variables. Assume that next year’s economy has a 40% chance of being strong and a 60% chance of being weak.Which investment would you suggest for the investor? Justify your answer.

 

 

 

asked May 1, 2014 in Statistics Answers by imanzi

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1 Answer

answered Jan 6 by Mathical Level 10 User (55,420 points)
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