Construct a payoff matrix for this problem what decision

Reference no: EM13622805

One of Larry's investments is going to mature, and he wants to determine how to invest the proceeds of $30,000. Larry is considering three new investments: a stock mutual fund (SMF), a one-year certificate of deposite (CD), or a nano-technology stock called (NNS). The CD is guaranteed to pay an 8% return. Larry estimates the return on the stock mutual fund (SMF) as 16%, 7%, or -9%, and the return on the nano-technology stock (NNS) as 30%, 5%, or -25%, depending on whether market conditions are good, average, or poor, respectively. Larry also has been collecting financial market information daily and estimates the probabilities of a good, average, and poor market to be 0.25, 0.45, and 0.30, respectively.

Construct a payoff matrix for this problem.

What decision should be made according to Minimax Regret Approach?

What decision should be made according to Expected Value Approach?

What is the EVPI?

Reference no: EM13622805

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