t 2 d: Mar 20 at 9:12pm iz Instructions w Instructions Question 7 5 pts Suppose
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t 2 d: Mar 20 at 9:12pm iz Instructions w Instructions Question 7 5 pts Suppose we are interested in investing in one of three investment opportunities: d1, d2, or d3. The following profit payoff table shows the profits (in thousands of dollars) under each of the 3 possible economic conditions-s1, s2, and s3. The probability of s1 is 0.1, and the probability of s2 is 0.3 Determine the expected value of decision d3. States of Nature Decision s1 18 19 3 70 I 30 d1 d2 d3 28 17 40 16 O None of the stated answers is correct. O 3.0 O 28.2 4.0 O 40.0 . PreviousExplanation / Answer
The expected values are
E(d1) = 18*0.1+28*0.3+30*0.6 = 28.2 (maximum)
E(d2) = 19*0.1+17*0.3+(-5)*0.6 = 4
E(d3) = 3*0.1+40*0.3+16*0.6 =21.9
Answer: 28.2
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