Allen Young conclude the best investment strategy. Now Young is thinking about paying for a stock market newsletter. A friend of Young said that these kinds of letters could predict very accurately whether the market would be good, fair, or poor. Then, based on these predictions Allen could make better investment decisions.
(a) Explain what is the most that Allen would be willing to pay for a newsletter?
(b) Young now trusts that a good market will give a return of only II % instead of 14%. Will this information alter the amount that Allen would be willing to pay for the newsletter? If your answer is yes, conclude the most that Allen would be willing to pay given this new information.