1. Given the payoff matrix below, answer the following questions:

Alternative State of Nature

#1 #2 #3 #4

A 1 0 2 3

B 2 4 5 6

C 4 3 1 2

(a) If somehow you find out for that state of nature #4 is going to occur, which alternative will you select?

(b) If you feel that P(#1) = .3, P(#2) = .4, P(#3) = .2, and P(#4) = .1,

(i) What is your expected payoff under certainty?

(ii) Which alternative has the highest expected monetary value?

(iii) What is your expected value of perfect information?