Exhibit 14.2 The Following Questions Are Based on the Information Below

question 112

Multiple Choice

Exhibit 14.2
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.
-Refer to Exhibit 14.2. What formula should go in cell F5 of the Regret Matrix above to compute the regret value?

• A) =B$5-MAX(B$5:B$8)
• B) =MAX(B$5:B$8)-MAX(B5)
• C) =MAX(B$5:B$8)-MIN(B$5:B$8)
• D) =MAX(B$5:B$8)-B5

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Definitions:

Future Earnings

The projected income a person or company is expected to generate in the future.

Public Saving

The portion of the government's revenue that remains after accounting for government spending.

Private Saving

The portion of households' income that is not spent on consumption but saved for future use.

Loanable Funds

The sum of money available for borrowing, influenced by savings and investments, within an economy at any given time.