Interest Rates
Investments 5% 6% 7% 8% 9%
Money market fund 1.7 2.8 3.0 3.6 4.5
Stock growth fund -5 -3 3.5 5 7.5
Bond fund 5 4 3.5 3 2
Government fund 4 3.6 3.2 2.8 2.1
Risk fund -12 -7 4.2 9.3 16.7
Savings bonds 3 3 3.2 3.4 3.5
Determine the best investment using the following decision criteria.
a. Maximax b. Maximin c. Equal likelihood
d. Assume that Nicole, with the help of a financial newsletter and some library research, has
been able to assign probabilities to each of the possible interest rates during the next year as
follows:
Interest Rate 5% 6% 7% 8% 9%
Probability 0.1 0.2 0.4 0.2 0.1
Using expected value, determine her best investment decision
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