Sue Pansky, a retired grade-school teacher, is considering investing in Starting Right. She is very conservative and is a risk avoider. What do you recommend?
Answer: Since Sue Pansky is a risk avoider she should invest in the corporate bonds. The bond would return 13% per year and at least $ 20,000 back at the end of the year.
Ray Cahn, who is currently a commodities broker, is also considering an investment, although he believes that there is only an 11% chance of success. What do you recommend?
Answer: Ray Cahn should choose the common stock alternative which will give highest payoff.
Lila Battle has decided to invest in Starting Right. While she believes that Julia has a good chance of being successful, Lila is a risk avoider and very conservative. What is your advice to Lila?
Answer: Just like Sue Pansky, Lila Battle is a risk avoider and very conservative. What sets them apart is that Lila believed that Julia has a good chance in being successful. Lilia should us the maximum decision criteria because she wants to avoid risk. The minimum or worst outcome for each alternative is identified, thus, Lila would select corporate bonds that reflects a pessimistic decision approach.
George Yates believes that there is an equally likely chance for success. What is your recommendation?
Answer: George believe that there is an equally likely chance for success, he could use the equally approach. This approach selects the alternative that maximize the row average. The decision is to select the common stock (CS) alternative with a now of $ 105,000.00
Peter Metarko is extremely optimistic about the market for the new baby food. What is your advice for Pete?
Answer: Since Peter Metarko is extremely optimistic he should choose the common stock, alternative this investment ( $ 30,000) would increase by a factor of 8 which is a maximum value. Thus, Peter is to select the CS alternative which is an optimistic decision approach....
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