What decision would maximize expected profits?

Reference no: EM13155866

John Carpenter is considering investing some money he won at a game show. The following payoff table gives the profits that would be realized during the next year for each of three investment alternatives John is considering:

State of Nature
Decision Alternative Good Economy Poor Economy
Stock market 80,000 -20,000
Bonds 30,000 20,000
CDs 23,000 23,000
Probability 0.5 0.5

a. What decision would maximize expected profits?

b. What is the maximum amount that should be paid for a perfect forecast of the economy?

Reference no: EM13155866

Questions Cloud

You just finished getting your data : You just finished getting your data, made sure there were no fliers and the data was correct You created a mean and standard deviation and ran your Z test at the 0.05 alpha Your decision rule is 1.645 and your Z test statistic ( step 3 ) is 1.647

Discuss why if most people are risk-averse they gamble : Classify each of the following scenarios as an example of adverse selection or moral hazard. Be sure to support your answer! Nordstromâ€ TM s cannot predict who is going to be a good shoe salesperson.

Calculate the volume, in liters, : calculate the volume, in liters, occupied by 3.25 moles of Cl2 gas at 1.54 atm pressure and a temperature of 213 degrees celcius?

Evidence-company-s light bulbs differs from advertised mean : Assume that the bulb life is normally distributed. At the 10% significance level, do the data provide evidence that the mean life for the company's light bulbs differs from the advertised mean?

What decision would maximize expected profits? : a. What decision would maximize expected profits? b. What is the maximum amount that should be paid for a perfect forecast of the economy?

Why is there a need to produce okazaki fragments : why is there a need to produce Okazaki fragments on the lagging strand, but not on the leading strand of DNA?

Explain what was the concentration in ppm of silver ions : Sodium carbonate was used to precipitate silver from a solution. 6.00 grams of silver carbonate were recovered from 1.500L of solution. What was the concentration in ppm of silver ions in the original solution?

What is its corresponding wavelength : The mass of a golf ball is 45.9 g. If it leaves the tee with a speed of 61.0 m/s, what is its corresponding wavelength?

Difference simply may be sampling error : Briefly explain how the difference may have been caused by the treatments b) Briefly explain how the difference simply may be sampling error

User Account

All Pages