Exhibit 14.1 The Following Questions Are Based on the Information Below

question 114

Multiple Choice

Exhibit 14.1
The following questions are based on the information below.
An investor is considering 4 investments, A, B, C and leaving his money in the bank. 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 payoff matrix has been developed for the decision problem.
-Probabilistic decision rules can be used if the states of nature in a decision problem can be assigned probabilities that represent their likelihood of occurrence. Which of the following is not true regarding the probabilities employed?

• A) The probabilities are always obtained from historical data.
• B) The probabilities must always be unbiased.
• C) The probabilities can be assigned subjectively.
• D) Subjective probabilities obtained can be accurate and unbiased.

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Definitions:

Independent Variable

Within a study, the variable which is altered or adjusted by the investigator to see its impact on the dependent variable.

Dependent Variable

The dependent variable is the variable being tested and measured in a scientific experiment, which is expected to change as a result of variations in the independent variable.

Anecdotal Evidence

Information derived from personal accounts, observations, or stories rather than from scientific analysis or hard data.

Statistical Evidence

Information derived from statistical procedures that is used to support or refute an assertion, hypothesis, or claim.