Mickey Lawson is considering investing some money that he inherited The following payoff table gives the profits that would be realized during the next year for each of three investment alternatives Mickey is considering State of Nature Decision Alternative Good Economy Poor Economy Stock Market 80000 20000 Bonds 40000 21000 CDs 25000 25000 Probability 5 5 (a) What decision would maximize expected profits (b) What is the maximum amount that should be paid for a perfect forecast of the economy (c) Develop an opportunity loss table for the investment problem that Mickey Lawson faces (d) What decision would minimize the expected opportunity loss (e) What is the minimum EOL

Question: Mickey Lawson is considering investing some money that he inherited. The following payoff table gives the profits that would be realized during the next year

Mickey Lawson is considering investing some money that he inherited. The following payoff table gives the profits that would be realized during the next year for each of three investment alternatives Mickey is considering:

	State of Nature
Decision Alternative	Good Economy	Poor Economy
Stock Market	80000	-20000
Bonds	40000	21000
CDs	25000	25000
Probability	.5	.5

(a) What decision would maximize expected profits?

(b) What is the maximum amount that should be paid for a perfect forecast of the economy?

(d) What decision would minimize the expected opportunity loss?

(e) What is the minimum EOL?

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