Discrete 2. Nick has $5000 to invest and will commit the whole amount, for six months, to one of three technology stocks

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Discrete 2 Nick Has 5000 To Invest And Will Commit The Whole Amount For Six Months To One Of Three Technology Stocks 1 (75.62 KiB) Viewed 43 times

Discrete 2. Nick has $5000 to invest and will commit the whole amount, for six months, to one of three technology stocks. A number of uncertainties could affect the prices of these stocks, but Nick is confident, based on his research; that one of only several possible profit scenarios will prove true of each one at the end of the six-month period. Company ABC Profit Probability -400 Company RST Profit Probability 500 0.8 Company XYZ Profit Probability 0 0.4 0.2 800 0.3 0.5 1000 0.2 700 1500 0.1 0.3 1200 2000 0.2 a. Find the expected profit (or loss) or loss for each of the three stocks. Company ABC Company RST Company XYZ b. Which is the optimal choice based on expected value? Company ABC Company RST Company XYZ c. If Nick is an optimist, which stock would Nick choose? Company ABC Company RST Company XYZ d. If Nick is a pessimist, which stock would Nick choose? Company ABC Company RST Company XYZ