Exhibit 14.1 The Following Questions Are Based on the Information Below

question 114

Multiple Choice

Exhibit 14.1
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.
-Probabilistic decision rules can be used if the states of nature in a decision problem can be assigned probabilities that represent their likelihood of occurrence. Which of the following is not true regarding the probabilities employed?

• A) The probabilities are always obtained from historical data.
• B) The probabilities must always be unbiased.
• C) The probabilities can be assigned subjectively.
• D) Subjective probabilities obtained can be accurate and unbiased.

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Definitions:

1783

A pivotal year marked by the signing of the Treaty of Paris, which officially ended the American Revolutionary War.

Constitution Drafting

The process of writing and creating a constitution, which outlines the fundamental principles and laws by which a state or organization is governed.

Congressional Authority

The powers granted to the United States Congress by the Constitution, including making laws, declaring war, and controlling federal spending.