Question: For the carrental situation, compute the standard deviation of the payoffs for each decision. What does this tell you about the risk in making the

For the carrental situation, compute the standard deviation of the payoffs for each decision. What does this tell you about the risk in making the decision?

Suppose that a car rental agency offers insurance for a week that costs $ 75. A minor fender bender will cost $ 2,000, whereas a major accident might cost $ 16,000 in repairs. Without the insurance, you would be personally liable for any damages. What should you do? Clearly, there are two decision alternatives: take the insurance, or do not take the insurance. The uncertain consequences, or events that might occur, are that you would not be involved in an accident, that you would be involved in a fender bender, or that you would be involved in a major accident. Develop a payoff table for this situation.

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