Exhibit 14.3 The Following Questions Are Based on the Information Below

question 28

Multiple Choice

Exhibit 14.3
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. The investor has estimated the probability of a declining economy at 70% and an expanding economy at 30%.
-The decision rule which determines the minimum payoff for each alternative and then selects the alternative associated with the largest minimum payoff is the

• A) maximax decision rule.
• B) maximin decision rule.
• C) minimax regret decision rule.
• D) minimin decision rule.