What decision should be made according to eol decision rule

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Reference no: EM1379826

Q. One of Philip Mahn's investments is going to mature also he wants to determine how to invest proceeds of $30,000. Philip is considering two new investments: a stock mutual fund also a one-year certificate of deposit (CD). CD is guaranteed to pay an 8% return. Philip estimates return on stock mutual fund as 16%, 9% or -2%, depending on whether market conditions are good, average or poor, respectively. Philip estimates probability of a good, average also poor market to be 0.1, 0.85 also 0.05, respectively. Construct a payoff matrix.

What decision should be made according to maximum decision rule?

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What decision should be made according to EOL decision rule?

How much should Philip be willing to pay to obtain a market forecast that is 100% accurate?

Reference no: EM1379826

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