Ray Crofford Is Evaluating Investment Alternatives for the $100,000 Which

question 2

Multiple Choice

Ray Crofford is evaluating investment alternatives for the $100,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following table which shows expected profits (in $10,000's) for various market conditions and their probabilities. The expected value of perfect information is ________.

• A)$57,000
• B)$63,000
• C)$79,000
• D)$82,000
• E)$87,000

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Definitions:

Mean

The arithmetic average of a set of numbers, calculated by adding all the values together and dividing by the number of values.

25th Percentile

A measure indicating that 25 percent of the observed values fall below this point, also known as the first quartile.

Median

The middle value in a sorted list of numbers, effectively dividing the dataset into two equal parts.

75th Percentile

A value below which 75% of the observations in a group fall, often used to measure the upper quartile.