Using expected values of present worth

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Reference no: EM131561007

You have $1000 to invest in one of three ways: buy Stock, buy a Painting, or put it in a fixed interest Savings Account. You plan to leave the investment untouched for 10 years. You assess that there is a 25% chance that your Stock will double in 10 years, a 50% chance it will increase by 50%, and a 25% chance it will stay at $1000 after 10 years. For the Painting you assess that there is a 1% chance it will be worth 10 times in 10 years, a 20% chance it will be worth 3 times, a 30% chance it will be worth 1.5 times, and a 49% chance it will stay the same value after 10 years. Finally, the savings Account would pay 3% annual interest for 10 years. Make a Decision Tree to show possible results. Using Expected values of Present Worth, what choice has the best outcome?

Reference no: EM131561007

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