In Problem S1-3 the Landloc real estate development firm has hired an economist to assign a probability to each direction interest rates may take over the next five years. The economist has determined that there is a 0.50 probability that interest rates will decline, a 0.40 probability that rates will remain stable, and a 0.10 probability that rates will increase.
a. Using expected value, determine the best project.
b. Determine the expected value of perfect information.