Mickey Johnson is considering investing some money that heinherited. The following payoff table gives the             profits that would be realized during the next year for each ofthree investment alternatives Mickey is             considering (You should calculate the results to supportyour conclusions to get the credit): (10 points)
| Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â State of Nature |
Decision Alternative | Good Economy | Poor Economy |
Stock market | 50,000 | -20,000 |
Bonds | 30,000 | 15,000 |
CDs | 20,000 | 20,000 |
Probability | 0.8 | 0.2 |
- What decision would maximize expected profits? (4 points)
- What is the maximum amount that should be paid for a perfectforecast of the economy? (3 points)
- Develop an opportunity loss table for the investment problemthat Mickey Lawson faces. What decision would minimize the expectedopportunity loss? What is the minimum EOL? (3 points)
