do test only use techniqes found in files

DT max objective

Decision	Rates rise	Rates stable	Rates fall
Bank CD	400	400	400
Bond fund	-500	840	1000
Stock fund	-900	600	1700

Scenario: $10,000 investment. Alternatives--invest in CD, bonds, or stocks. Returns vary according to changes in interest rates. Suppose Prob(rates rise) = 0.6 and Prob(rates fall) = 0.1

DT min objective

	slight decline	moderate decline	large decline
Stay in Michigan	1,000,000	800,000	840,000
Move to Wisconsin	1,100,000	950,000	750,000

Utility 1

Decision	Rates rise	Rates stable	Rates fall
Bank CD	400	400	400
Bond fund	-500	840	1000
Stock fund	-900	600	1700
	x	U(x)
	1700	1
	1000	0.9
	840	0.85
	600	0.8
	400	0.75
	-500	0.35
	-900	0

Scenario: $10,000 investment. Alternatives--invest in CD, bonds, or stocks. Returns vary according to changes in interest rates.

U(x) 1700 1000 840 600 400 -500 -900 1 0.9 0.85 0.8 0.75 0.35 0

Utility 2

Decision	Rates rise	Rates stable	Rates fall
Bank CD	400	400	400										Utility payof matrix
Bond fund	-500	840	1000
Stock fund	-900	600	1700			R	400						Decision	Rates rise	Rates stable	Rates fall	ave
													Bank CD	0.6321205588	0.6321205588	0.6321205588	0.6321205588
													Bond fund	-2.4903429575	0.8775435717	0.9179150014	-0.2316281281
													Stock fund	-8.4877358364	0.7768698399	0.9857357661	-2.2417100768
	x	U(x)
	1700	0.9857357661
	1000	0.9179150014
	840	0.8775435717
	600	0.7768698399
	400	0.6321205588
	-500	-2.4903429575
	-900	-8.4877358364

Scenario: $10,000 investment. Alternatives--invest in CD, bonds, or stocks. Returns vary according to changes in interest rates.

U(x) 1700 1000 840 600 400 -500 -900 0.98573576609100078 0.91791500137610116 0.87754357174701814 0.77686983985157021 0.63212055882855767 -2.4903429574618414 -8.4877358363585262

U(x) = 1-e^(-x/R) where R is the maximun amount you would be willing to risk where you have a 50/50 chance of winning R or losing R/2