Question: Michael will invest money in bonds for a company. He can choose only one out of three companies. The information below represents the apreciation or depreciation ocurred in the past years:
| Investment Decision |
Apreciation in the market: 60%
|
Depreciation in the market: 40%
|
| Bond A |
$ 50,000 |
$ 26,000 |
| Bond B |
110,000 |
-35,000 |
| Bond C |
40,000 |
28,000 |
Michael has the option of hiring a bond market specialist to give you a report on whether you anticipate that the bond market will behave in a (F) FAVORABLE or (N) NEGATIVE manner.
A - Appreciation in the bond market
D - Depreciation in the bond market
F - The specialist report will report a favorable behavior.
N - the specialist report will report a negative behavior.
The past historical data of this specialist reveals the following propabilities (from his reports):
Pr (F|A): 0.85
Pr (F|D): 0.10
Pr (N|A): 0.15
Pr(N|D): 0.90
What is the investment strategy that Michael must follow according to the report that the specialist gives him?