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A financial analysis portfolio considers a decision whereby you part with Sh. 10 Million in
one of two or both investment alternatives. You have decided to have three decisions:
D1: Invest all the Sh. 10 M in investment portfolio A.
D2: Invest Sh. 5 M each in investment portfolios A and B.
D3: Invest Sh. 10 M in investment portfolio B.
You are further informed that annual rate of return for alternative A can either be -0.05 or
0.10 and alternative B would either be -0.10 or 0.20. However, it is not known with
certainty which investment alternative will be associated with which rate of return.
Choose the investment that will maximize the returns using the decision criteria:
(i) Maximax rule
(ii) Maximin rule
(iii) Minimax regret rule
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