Exhibit 14.10
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 decision problem.The investor has estimated the probability of a declining economy at 80% and an expanding economy at 20%.
-Refer to Exhibit 14.10.Complete the following table to determine the expected value of perfect information for the investor.
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