Suppose we are interested in investing in one of three investment opportunities: d1,d2,or d3.The following profit payoff table shows the profits (in thousands of dollars)under each of the 3 possible economic conditions-S1,S2,and S3.The probability of the occurrence of S1 is 0.1,and the probability of the occurrence of S2 is 0.3.
a.Determine the expected value of each alternative and indicate which decision alternative is the best.
b.Determine the expected value with perfect information about the states of nature.
c.Determine the expected value of perfect information.
Definitions:
Confusing
Something that is difficult to understand or makes one perplexed.
Implied Warranty
A legal doctrine that guarantees that a product or service will meet certain minimum standards of quality and functionality, even if not expressly stated.
Assurances
Statements or actions intended to provide confidence or certainty about a condition or result.
Representations
Statements of fact made by one party to another before or at the time of entering into a contract, intended to induce the other party into the contract.
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