Describe the Major Tools and Criteria for Decision Making The Probability of Rates Rising Is 0

question 8

Multiple Choice

Describe the major tools and criteria for decision making. Use the information below to answer the following question(s) . The payoff table given below lists four mortgage options: $\begin{array}{|l|l|l|l|}\hline &\text { Outcome }\\\hline \text { Probability } & {\mathbf{0 . 6}} &{\mathbf{0 . 3}} &{\mathbf{0 . 1}} \\\hline \text { Decision } & \text { Rates Rise } & \text { Rates Stable } & \text { Rates Fall } \\\hline \text { 1-year ARM } & \$ 66,645 & \$ 43,650 & \$ 38,560 \\\hline \text { 3-year ARM } & \$ 62,857 & \$ 47,698 & \$ 42,726 \\\hline \text { 5-year ARM } & \$ 55,895 & \$ 50,894 & \$ 48,134 \\\hline \text { 30-year fixed } & \$ 52,276 & \$ 52,276 & \$ 52,276 \\\hline\end{array}$ The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
-What is the expected payoff of the 5-year ARM?

• A) $ 17,872.90
• B) $ 53,618.60
• C) $ 48,805.20
• D) $ 20,081.80

---

Definitions:

Gene Flow

The transfer of genetic variation from one population to another, which can occur through various means such as migration or exchange of pollen.

Sun's Radiation

The Sun's radiation includes the broad spectrum of electromagnetic energy emitted by the Sun, including visible light, ultraviolet light, infrared, and other forms of energy vital to Earth's climate and living organisms.

G6PD Deficiency

A genetic disorder affecting red blood cells, leading to increased vulnerability to certain diseases and substances.

Red Blood Cells

Cells in the blood which transport oxygen from the lungs to tissues throughout the body and help remove carbon dioxide.