Reference no: EM133131779

Suppose that you were thinking of making an investment in two stocks-the ABC Aerospace Corporation and the XYZ Electronics Corporation-based on the advice on your stockbroker. From your readings of various stock market analysts' reports, you understand that there is a 50-50 expectation that the stock price of ABC will go up (in other words, the probability of the stock increasing in price is 50%).

You also have learned that the stock price of the XYZ Corporation is correlated with the movement of ABC's stock price since ABC is a major customer of XYZ. If the stock of ABC goes up, there is a 40% probability that the stock of XYZ will go up. However, if the stock of ABC goes down, the probability that the stock of XYZ goes up is only 20%.

Identify key uncertainties:

Identify the key decisions:

Draw an Influence Diagram below: