Business, 05.05.2020 11:47, tessafargo
One of Mabel Smith’s investments is going to mature, and he wants to determine how to invest the proceeds of $30,000. Mabel is considering two new investments: a stock mutual fund and a one-year certificate of deposit (CD). The CD is guaranteed to pay an 8% return. Mabel estimates the return on the stock mutual fund as 16%, 9%, or 22%, depending on whether market conditions are good, average, or poor, respectively. Mabel estimates the probability of a good, average, and poor market to be 0.1, 0.85, and 0.05, respectively.
a. Construct a payoff matrix for this problem.
b. What decision should be made according to the maximax decision rule?
c. What decision should be made according to the maximin decision rule?
d. What decision should be made according to the minimax regret decision rule?
e. What decision should be made according to the EMV decision rule?
f. What decision should be made according to the EOL decision rule?
g. How much should Mabel be willing to pay to obtain a market forecast that is 100% accurate?
Answers: 3
Business, 22.06.2019 16:00, ari313
What impact might an economic downturn have on a borrower’s fixed-rate mortgage? a. it might cause a borrower’s payments to go up. b. it might cause a borrower’s payments to go down. c. it has no impact because a fixed-rate mortgage cannot change. d. it has no impact because the economy does not affect interest rates.
Answers: 1
Business, 22.06.2019 16:50, cutebab4786
Slow ride corp. is evaluating a project with the following cash flows: year cash flow 0 –$12,000 1 5,800 2 6,500 3 6,200 4 5,100 5 –4,300 the company uses a 11 percent discount rate and an 8 percent reinvestment rate on all of its projects. calculate the mirr of the project using all three methods using these interest rates.
Answers: 2
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