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Home > Statistics Every Writer Should Know > The Stats Board > Discusssion

AHP I can not do this practice question
Message posted by Av on February 13, 2001 at 12:00 AM (ET)

It is now several years since the successful completion of your MBA at Queen’s. As a result, you are experiencing a degree of financial comfort and where to invest money is a daily topic of conversation with your partner. You have settled upon two objectives: the expected rate of return and the degree of risk. Furthermore, you agree that these objectives are of equal importance. Recalling AHP from years ago, you have dug out your notes and prepared the following pair wise comparison matrices for the two candidate investment portfolios (Portfolio I and Portfolio II).

Return Port I Port II
Port I
Port II 2

Risk Port I Port II
Port I 3
Port II


How should these portfolios be ranked?

During breakfast some time after conducting this analysis one of your children (now an adult employed with one of the major brokerage houses in New York and home to visit for a few days) brings to your attention a third portfolio that is deserving of some thought. You and your partner sit down and go through the routine of including it in in the pairwise comparison with the following outcome.

Return Port I Port II Port III
Port I 4
Port II 2 8
Port III

Risk Port I Port II Port III
Port I 3
Port II
Port III 2 6

Notice that the entries in the comparison matrices for Port I and Port II have not changed. How should you now rank the investments? Contrast this outcome with the one found above.



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