Decision-making under conditions of certainty, Mathematics

Assignment Help:

Decision-Making Under Conditions of Certainty

Conditions of certainty tend to be rare, especially when significant decisions are involved. Under conditions of certainty, decision is very easy.

Example 

An investment analyst must make a decision about investing in one of the three investment portfolio packages. Each investment portfolio contains different proportions of common stock, industrial bonds and real estate. The table below gives the gains of investing in these portfolios under different states of nature S1, S2 and S3 based on the projection of changes in stock prices, yields on bonds and appreciation in real estate values.

Strategy: Investment in Portfolio

SRs

SRs.

SRs.


A

20,000

2,000

1,000

B

30,000

27,000

-16,000

C

40,000

15,000

-40,000

Under conditions of certainty we have to choose that alternative which gives us the maximum profit. Thus, in the state of nature, S1, the analyst decides to invest in portfolio C and S2 in portfolio B and S3 in portfolio A because that alternative gives the analyst the maximum benefit in that particular state.

 


Related Discussions:- Decision-making under conditions of certainty

Modeling , A plastic manufacturer has 1200 boxes of transparent wrap in sto...

A plastic manufacturer has 1200 boxes of transparent wrap in stock at one factory and 1000 boxes at his second factory.The manufacturer has order for this product from 3 different

Functions and graphs, Functions and Graphs Need assistance, Please de...

Functions and Graphs Need assistance, Please describe Functions and Graphs.

Fraction word problem, castor brought 6 3/4 carat cakes to share with 26 st...

castor brought 6 3/4 carat cakes to share with 26 students. did castor bring enough for each student to have 1/4 of cake?

UNITARY METHOD, A group of 120 men had food for 200 days.After 5 days , 30 ...

A group of 120 men had food for 200 days.After 5 days , 30 men die of disease.How long will the remaining food last

Finish the work., six men and Eight boys can finish a piece of work in 14 d...

six men and Eight boys can finish a piece of work in 14 days while  eight men and twelve boys can do it in 10 days. Find the time taken by  1man alone and that by 1boy alone to fin

Finite difference method, Two reservoirs of equal cross sectional areas (31...

Two reservoirs of equal cross sectional areas (315 m 2 ) and at equal elevations are connected by a pipe of length 20 m and cross sectional area 3 m 2 . The reservoir on the left (

Addition involving negative numbers, Q. Addition Involving Negative Numbers...

Q. Addition Involving Negative Numbers? Ans. When you add together positive and negative numbers, there are essentially three possibilities that you can encounter. Let's e

Solve the subsequent proportion, Solve the subsequent proportion: Exa...

Solve the subsequent proportion: Example: Solve the subsequent proportion for x. Solution: 5:x = 4:15 The product of the extremes is (5)(15) = 75. The produ

Limit problem, limit x-a/|x-a| equals x-a [a]a [b]0 [c]-a [d]none 0f these

limit x-a/|x-a| equals x-a [a]a [b]0 [c]-a [d]none 0f these

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd