A city manager is considering three strategies for a $1,000investment. The probable returns are estimated as follows: •Strategy 1: A profit of $5, 000 with a probability of 0.20 and aloss of $1, 000 with a probability of 0.80.
• Strategy 2: A profit of $2, 000 with a probability of 0.40, aprofit of $500 with a probability of 0.30 and a loss of $1, 000with a probability of 0.30.
• Strategy 3: A certain profit of $400.
(a) Which strategy has the highest expectedprofit?
(b) If the city manager is going to pick only 1strategy, which of the three strategies would you definitely adviseagainst? Provide specific (numeric) details to support youranswer.
