You Are Evaluating Investment Alternatives for a Ski Resort If You Use the EMV Criterion, What Is the Minimum

question 82

Multiple Choice

You are evaluating investment alternatives for a ski resort.There are four alternative investments and their payoffs (in $10,000s) are shown in the following table, depending on the snow conditions for the next season. $\begin{array}{r}\text { Snow Conditions }\\\begin{array}{ccc}\text { Investment } & \text { Good } & \text { Bad } \\d_{1} & 3 & 1 \\d_{2} & 8 & 0 \\d_{3} & 12 & -4 \\d_{4} & 18 & -12\end{array}\end{array}$
If you use the EMV criterion, what is the minimum probability that the conditions will be good for you to decide investment d₄?

• A)0.4
• B)0.43
• C)0.5
• D)0.57
• E)0.59

---

Definitions:

Culturally Fair

Describing a concept, test, or practice that is designed to be equitable and unbiased towards individuals of different cultures.

British Scholar

An academic from the United Kingdom recognized for contributing knowledge and research in a specific field of study.

Hereditary

Pertaining to characteristics or traits transmitted from parents to offspring through genes.

Information Processing Theory

A cognitive approach that likens human memory to computer operations, focusing on how information is encoded, stored, and retrieved.