Refer to the Following Payoff Table

question 42

Multiple Choice

Refer to the following payoff table:

There is an option of paying $100 to have research done to better predict which state of nature will occur. When the true state of nature is S1, the research will accurately predict S1 60% of the time. When the true state of nature is S2, the research will accurately predict S2 80% of the time.
Given that the research is done, what is the joint probability that the state of nature is S1 and the research predicts S2?

• A) 0.08
• B) 0.16
• C) 0.24
• D) 0.32
• E) 0.36

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Definitions:

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