An Investor Has a Choice Between Four Investments

question 55

Essay

An investor has a choice between four investments.The profitability of the investments depends upon the market.The payoff table is given below for different market conditions.
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a.A market economist has stated that there is a 25% chance that the market will stay the same,a 35% chance that the market will decrease,and a 40% chance that the market will increase.Compute the expected value for each investment.Which investment is the best?
b.Compute the expected value of perfect information.​

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Definitions:

Postdated Check

A check written with a date in the future, preventing the check from being deposited or cashed until that date.

Properly Payable

Refers to checks or drafts that meet all criteria for payment by the bank on which they are drawn, in accordance with the account holder's instructions and the bank's agreement with the customer.

Refusing To Pay

Refusing to pay describes a situation where a party deliberately does not settle a financial obligation, debt, or bill owed to another.

Postdated

Referring to a check or other document dated at some point in the future, not effective or valid until that date.