Exhibit 14 -Refer to Exhibit 14

question 92

Essay

Exhibit 14.9
The following questions are based on the information below.
An investor is considering 4 investments,W,X,Y,and Z.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 investment decision problem.
$\begin{array}{|c|c|c|c|c|c|}\hline & \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & E \\\hline 1 & & \begin{array}{|ll} & \text { Payoff } \\\text { Matrix } & \\\end{array} & & & \\\hline 2 & & & & & \\\hline 3 & & \text { Economy } & & & \\\hline 4 & \text { Investment } & \text { Decline } & \text { Expand } & & \text { Choice } \\\hline 5 & \mathrm{~W} & 0 & 80 & & \\\hline 6 & \mathrm{X} & \begin{array}{l}3 \\0 \\\end{array} & 70 & & \\\hline 7 & \mathrm{Y} & \begin{array}{l}5 \\0 \\\end{array} & 35 & & \\\hline 8 & z & \begin{array}{l}2 \\0 \\\end{array} & 20 & & \\\hline & \text { Payoffs } & & & & \\\hline\end{array}$

-Refer to Exhibit 14.9.What formula should go in cell D5 of the following Regret Table to implement the minimax regret decision rule? Assume that cells B5:C8 contain the regret values for the problem.
$\begin{array}{|c|c|c|c|c|}\hline & \text { A } & \text { B } & \text { C } & \text { D } \\\hline 1 & & \text { Regret Matrix } & & \\\hline 2 & & & & \\\hline 3 & & \text { Economy } & & \\\hline 4 & \text { Investment } & \text { Decline } & \text { Expand } & \\\hline 5 & \text { W } & & & \\\hline 6 & \mathrm{X} & & & \\\hline 7 & \mathrm{Y} & & & \\\hline 8 & \text { Z } & & & \\\hline & \text { Regret } & & & \\\hline\end{array}$

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