Ray Crofford Is Evaluating Investment Alternatives to Invest $100,000 Which $\quad$

question 61

Multiple Choice

Ray Crofford is evaluating investment alternatives to invest $100,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000's) for various market conditions. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\quad$$\text { Market Condition }$
$\begin{array}{|c|c|c|c|}\hline \text { Investment } & \text { Bull } & \text { Neutral } & \text { Bear } \\\hline \text { T-Bills } & 3 & 3 & 3 \\\hline \text { Stocks } & 21 & 11 & -30 \\\hline \text { Bonds } & 15 & 4 & -3 \\\hline \text { Mixture } & 13 & 6 & -10 \\\hline\end{array}$

If Ray uses the maximax criterion, the appropriate choice would be ________.

• A)T-Bills
• B)Stocks
• C)Bonds
• D)Mixture
• E)None

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Definitions:

Per Month

A term indicating a frequency or rate that applies to each month.

Each Quarter

A period of three months used in financial and business reporting.

Per Month

A term indicating the occurrence or measurement of something on a monthly basis.

Compounded Quarterly

Interest on an investment or loan calculated four times a year, adding each interest payment to the principal for future calculations.