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

---

Definitions:

Discount

A reduction from the usual cost of something, often provided as an incentive to encourage purchase.

Contract Rate

The agreed-upon interest rate specified in a contract, often related to loans or financial agreements.

Market Rate

The prevailing interest rate available in the marketplace on investments, loans, and deposits.

Interest Changes

Adjustments made to the interest rate applicable on loans, savings, or investments over time.