please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly As part of their investment strategy, the Carringtons have decided to put $100,000 into stock market investments and also into purchasing precious metals. The performance of theinvestments depends on the state of the economy in the next year. In an expanding economy, it is expected that their stock market investment will outperform their investment inprecious metals, whereas an economic recession will have precisely the opposite effect. Suppose the following payoff matrix gives the expected percentage increase or decrease inthe value of each investment for each state of the economy.Stock market investment305Expanding Economiceconomy recession-1510Commodity investment(a) Determine the optimal investment strategy for the Carringtons' investment of $100,000. (Round your answers to the nearest dollar.)stockscommodities(b) What profit can the Carringtons expect to make on their investments over the year if they use their optimal investment strategy? (Round your answer to the nearestdollar.)$

To determine the optimal investment strategy for the Carringtons, use the concept of expected value.…

Answered: As part of their investment strategy,…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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