We have a choice of two investment strategies: stocks and bonds. The returns for each under two possible economic conditions are as follows:

a. If we assume the probability of Condition 1 is p₁ = 0.75 and Condition 2 is p₂ = 0.25, compute the expected values and select the best alternative.

b. What probabilities for Conditions 1 and 2 would have to exist to be indifferent toward stocks and bonds?

c. What other decision criteria would you consider? Explain your rationale.