Mickey Lawson is considering investing some money that he inherited. The following payoff table gives the profit that would be realized during the next year for each of three investments alternatives Mickey is considering: State of Nature Decision alternatives Good Economy Poor Economy Stock market 80,000 -20,000 Bonds 30,000 20,000 CDs 23,000 23,000 Probability 0.5 0.5 Compute decision would maximize expected profits. Compute the maximum amount that should be paid for a perfect forecast of the economy.
Mickey Lawson is considering investing some money that he inherited.
The following payoff table gives the profit that would be realized during the next year for each of three investments alternatives Mickey is considering:
State of Nature
Decision alternatives Good Economy Poor Economy
Stock market 80,000 -20,000
Bonds 30,000 20,000
CDs 23,000 23,000
Probability 0.5 0.5
- Compute decision would maximize expected profits.
- Compute the maximum amount that should be paid for a perfect
forecast of the economy.
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