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RISK AND UNCERTAINITY

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › RISK AND UNCERTAINITY

  • This topic has 1 reply, 2 voices, and was last updated 4 weeks ago by John Moffat.
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  • Author
    Posts
  • July 10, 2022 at 10:15 am #660234
    Atter
    • Topics: 1
    • Replies: 0
    • ☆

    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.
    Required:
    Choose the investment that will maximize the returns using the decision criteria:
    (i) Maximax rule
    (ii) Maximin rule
    (iii) Minimax regret rule

    July 10, 2022 at 3:57 pm #660242
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49921
    • ☆☆☆☆☆

    There is no point in typing out a full question and expecting to be provided with a full answer.

    You must have an answer in the same book in which you found the question, so ask about whatever it is in the answer that you are not clear about and then I will explain.

    In addition, everything needed to be able to answer this question is explained in my free lectures. The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.

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    Posts
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