Exhibit 20-2 Below You Are Given a Payoff Table Involving Three States

question 40

Multiple Choice

Exhibit 20-2
Below you are given a payoff table involving three states of nature and two decision alternatives. The probability that S₁ will occur is 0.1; the probability that S₂ will occur is 0.6; and the probability that S₃ will occur is 0.3.
-Refer to Exhibit 20-2. The expected value of perfect information equals

• A)12
• B)4
• C)37
• D)29

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Definitions:

Normal Curve

A symmetrical, bell-shaped curve that represents the distribution of many types of data where most occurrences take place around the central peak.

Asymptotic

Refers to behavior or properties that emerge as an argument approaches a boundary or infinity.

Z Scores

A metric that measures the number of standard deviations a data point is from the mean of the dataset.

Percentage

A proportion or share expressed as a fraction of 100, used to denote the relative size or magnitude of a part compared to the whole.