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.

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Definitions:

Conjunct

An element of a conjunction, serving as a component in a compound sentence or statement formed by connecting two simple statements with a conjunction.

Conjunction

In logic, an operator that yields true only if both of its operands are true; in grammar, a word used to connect clauses or sentences.

Truth Values

The valuation of propositions in logic which typically can be either true or false.

Statement Form

A logical structure that can represent propositions through the use of variables and symbols.