Three investment options for a small inheritance

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Debbie Gibson is considering three investment options for a small inheritance that she has just received. - stocks, bond, and money market. The return on her investment will depend on the performance of the economy, which can be strong, average or weak. The returns for each possible combination are shown in the following table: 

Investment

Strong

Average

Weak

Stocks

12%

6%

-10%

Bonds

7%

4%

1%

Money market

4%

3%

2%

Assume that Debbie will choose only one of the investment options. 

(a) Which investment should Debbie choose if she uses the maximax criterion? 

(b) Which investment should Debbie choose if she uses the maximin criterion? 

(c) Which investment should Debbie choose if she uses the equally likely criterion? 

(d) Which investment should Debbie choose if she uses the criterion of realism with OL = 0,5?

(e) Which investment should Debbie choose if she uses the minimax regret criterion? 

Please show in Excel

Reference no: EM133074650

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