Here it goes....
In a good economy, stocks pay 8% and bonds pay 4%. In a poor economy, Stocks pay -2% and BOnds pay 5%.
I need to write a payoffmatrix for this equation.
Which rows or columns dominate
If 60% is put in stocks and 40% is put in bonds, what is the expected payoff if the economy is Good?Bad?
If the probability of a Bad economy is 10% what should be the mix of Stocks and Bonds that would optimize the extracted payoff.