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7. Mr. Thaggert is trying to decide whether to invest in stocks or in CD's(Certificate of...

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Finance

7. Mr. Thaggert is trying to decide whether to invest in stocksor in CD's(Certificate of deposit). If he invests in stocks and theinterest rates go up, his stock investments go down by 2%, but hegains 1% in his CD's. On the other hand if the interest rates godown, he gains 3% in his stock investments, but he loses 1% in hisCD's.

  1. Write a payoff matrix for Mr. Thaggert.
  2. If you were his investment advisor, what strategy would youadvise?

Answer & Explanation Solved by verified expert
4.1 Ratings (547 Votes)
The payoff matrix for the given problem is CD Interest rates go up Interest rates go down Stocks Interest rates go up 2 1 2 1 Interest rates go down 3 1 3 1 In    See Answer
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7. Mr. Thaggert is trying to decide whether to invest in stocksor in CD's(Certificate of deposit). If he invests in stocks and theinterest rates go up, his stock investments go down by 2%, but hegains 1% in his CD's. On the other hand if the interest rates godown, he gains 3% in his stock investments, but he loses 1% in hisCD's.Write a payoff matrix for Mr. Thaggert.If you were his investment advisor, what strategy would youadvise?

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