What is the investment strategy

Reference no: EM132000383

Question: Michael will invest money in bonds for a company. He can choose only one out of three companies. The information below represents the apreciation or depreciation ocurred in the past years:

Investment Decision	Apreciation in the market: 60%	Depreciation in the market: 40%
Bond A	$ 50,000	$ 26,000
Bond B	110,000	-35,000
Bond C	40,000	28,000

Michael has the option of hiring a bond market specialist to give you a report on whether you anticipate that the bond market will behave in a (F) FAVORABLE or (N) NEGATIVE manner.

A - Appreciation in the bond market

D - Depreciation in the bond market

F - The specialist report will report a favorable behavior.

N - the specialist report will report a negative behavior.

The past historical data of this specialist reveals the following propabilities (from his reports):

Pr (F|A): 0.85

Pr (F|D): 0.10

Pr (N|A): 0.15

Pr(N|D): 0.90

What is the investment strategy that Michael must follow according to the report that the specialist gives him?

Reference no: EM132000383

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