An investor is considering 4 investments, A, B, C and leaving his money in the b

Question

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. A B C D 1 Payoff Matrix 2 3 Economy 4 Investment Decline Expand 5 A 0 85 6 B 25 65 7 C 40 30 8 Bank 10 10 Payoffs ____ 9. Refer to Scenario 15-1. What decision should be made according to the maximin decision rule? a. A b. B c. C d. Bank ____ 10. Refer to Scenario 15-1. What decision should be made according to the minimax regret decision rule? a. A b. B c. C d. Bank

Explanation / Answer

maximin decision rule : c. C minimax regret decision rule : b. B

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