Reference no: EM133113813
Felix Kamuche has always been proud of his personal investment strategies and has done very well over the last several years. He invests primarily in the stock market. Over the last several months, however, Felix has become very concerned about the stock market as a good investment. In some cases, it would have been better for Felix to have his money in a bank than in a stock market. During the next six months, Felix must decide whether to invest 20,000 in the stock market or in a six month certificate of deposit (CD) at an interest rate of 10%. If the market is good, Felix believes that he could get a 15% return on his money. With a fair market, he expects to get an 8% return. If the market is bad, he will most likely get no return at all in other words, the return would be 0%. Felix estimates that the probability of a good market is 0.4, the probability of a fair market is 0.4, and the probability of a bad market is 0.2.
(A). What type of decision is Felix facing?
(B). Develop a decision table for this decision & what is the best decision.
(C). What is the pessimistic decision?
(D). What is the optimistic decision?
(E). Develop an opportunity loss table and best strategy
(F). What is the minimax decision?
(G). What is the expected value of perfect information
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