Exam 17: An Introduction to Decision Theory

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the market declining in the next year is 0.5, which of the following statements are correct? i. The Expected Opportunity Loss for Company A is $20. ii. The Expected Opportunity Loss for Company B is $75. iii. The Expected Opportunity Loss for Company C is $440.

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the Market rising in the next year is 0.60, which of the following statements are correct? i. The Expected Monetary Value for Company A is $1,860. ii. The Expected Monetary Value for Company B is $1,860. iii. The Expected Monetary Value for Company C is $1,860.

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the market declining in the next year is 0.4, which of the following statements are correct? i. The Expected Opportunity Loss for Company A is $120. ii. The Expected Opportunity Loss for Company B is $120. iii. The Expected Opportunity Loss for Company C is $440.

An investor has a 35% chance of making $1,000 and a 65% chance of making $10,000, what is the expected payoff for this investor?

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the market declines in the next year, which of the following statements are correct? i. The Opportunity Loss for Company A is $250. ii. The Opportunity Loss for Company B is $30. iii. The Opportunity Loss for Company C is $500.

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the market declining in the next year is 0.5, which of the following statements are correct? i. The Expected value of stock purchased under conditions of certainty is $1,675. ii. The Expected value of stock purchased under conditions of certainty is $2,200. iii. The Expected value of stock purchased under conditions of certainty is $1,150.

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the market declining in the next year is 0.4, which of the following statements are correct? i. The Expected Opportunity Loss for Company A is $20. ii. The Expected Opportunity Loss for Company B is $120. iii. The Expected Opportunity Loss for Company C is $440.

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the market rises in the next year, which of the following statements are correct? i. The Opportunity Loss for Company A is $200. ii. The Opportunity Loss for Company B is $0. iii. The Opportunity Loss for Company C is $400.

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the market declining in the next year is 0.4, which of the following statements are correct? i. The Expected value of stock purchased under conditions of certainty is $1,980. ii. The Expected value of perfect information is $120. iii. The Expected value of perfect information is $180.

i)EVPI = Expected value under conditions of certainty-Optimal decision under conditions of uncertainty Ii) Three regret strategies that are often used are Maximin, Maximax, and Minimax Iii) Rankings of the decision alternatives are frequently not highly sensitive to changes in the applied probabilities within a plausible range.

The states of nature are:

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the market declines in the next year, which of the following statements are correct? i. The Opportunity Loss for Company A is $300. ii. The Opportunity Loss for Company B is $0. iii. The Opportunity Loss for Company C is $50.

I You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the market rises in the next year, which of the following statements are correct? i. The Opportunity Loss for Company A is $200. ii. The Opportunity Loss for Company B is $200. ii. The Opportunity Loss for Company C is $700.

Given the following decision table in which x, y, and z are decision alternatives and A and B are states of nature. Which alternative would be chosen if using the maximin criterion?

The maximin strategy:

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the market declining in the next year is 0.5, which of the following statements are correct? i. The Expected value of stock purchased under conditions of certainty is $1,675. ii. The Expected value of perfect information is $75. iii. The Expected value of perfect information is $180.

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the market declining in the next year is 0.5, which of the following statements are correct? i. The Expected Opportunity Loss for Company A is $120. ii. The Expected Opportunity Loss for Company B is $75. iii. The Expected Opportunity Loss for Company C is $200.

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the market rises in the next year, which of the following statements are correct? i. The Opportunity Loss for Company A is $200. ii. The Opportunity Loss for Company B is $200. iii. The Opportunity Loss for Company C is $200.

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the Market rising in the next year is 0.50, which of the following statements are correct? i. The Expected Monetary Value for Company A is $1,450. ii. The Expected Monetary Value for Company B is $1,600. iii. The Expected Monetary Value for Company C is $1,475.

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the Market rising in the next year is 0.60, which of the following statements are correct? i. The Expected Monetary Value for Company A is $1,860. ii. The Expected Monetary Value for Company B is $1,860. iii. The Expected Monetary Value for Company C is $1,540.