QUESTION 14 OPTIONAL BONUs QUESTION WORTH 10 POINTS: You are looking to invest i

Question

QUESTION 14 OPTIONAL BONUs QUESTION WORTH 10 POINTS: You are looking to invest in several dfferent real estate deals. You have received economic reports that explain the probability of good economic conditions will be 6 and 4 for bad economic conditions. Below is the Payoff Table. Calculate the expected value for each decision and select the best deal. Bad Econemx Condzione (40 Decisn Conditions ( 60) Aprtint Builie Office Buid WahouR 30p00 $100 poo $30p00 s 30 poo $-40000 $ 10,000 O Apartment at $42,000 Office at $44,000 O Warehouse at $22.000 None of the above! Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All Answers

Explanation / Answer

1) expected value for apartment building =50000*0.6+30000*0.4 =42000

expected value for office building =100000*0.6-40000*0.4=44000

expected value for warehouse =30000*0.6+10000*0.4 =22000

hence best deal is : office bulding (44000)

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