Exhibit 14.5 The Following Questions Are Based on the Information Below

question 108

Multiple Choice

Exhibit 14.5
The following questions are based on the information below.
An investor is considering 4 investments, A, B, C, D. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following decision tree has been developed for the problem. The investor has estimated the probability of a declining economy at 40% and an expanding economy at 60%.
-The ____ in a decision problem represent factors that are important to the decision maker.

• A) payoffs
• B) states of nature
• C) criteria
• D) alternatives

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Definitions:

Managing Information

The systematic process of collecting, organizing, storing, and retrieving data and information to support decision-making and operational activities.

Bullets

Small circles (filled or open) or squares that set off items in a list. When you are giving examples, but the number is not exact and the order does not matter, use bullets to set off items.

Checklists

Detailed lists of items to be checked or tasks to be completed, used as a reminder to ensure that important steps or activities are not overlooked.

Voicemail Message

A recorded audio message left by a caller when the recipient is unavailable to answer a telephone call.