PLEASE USE THIS FORMAT PROVIDED Debbie Gibson is considering three investment options for a small inheritance that she has just receivedstocks, bonds, and money market The return on her investment will depend on the performance of the economy, which can be strong, average, or weak The returns for each possible combination are shown in the following table Assume that Debbie will choose only one of the investment options (a) Which investment should Debbie choose if she uses the maximax criterion (b) Which investment should Debbie choose if she uses the maximin criterion (c) Which investment should Debbie choose if she uses the equally likely criterion (d) Which investment should Debbie choose if she uses the criterion of realism with Problem 8 16 Outcomes Strong Average Weak PAYOFFS Alternatives Stocks Bonds Money Market (a) Maximax Maximum Choice 0 Best 0 Best 0 Best (b) Maximin (c) Equally Likely Minimum Choice Average Choice 0 Best DIV 0 DIV 0 Best DIV 0 DIV 0 0 Best DIV 0 DIV 0 (d) Hurwicz Realism Choice 0 Best Best 0 Best a 0 5 0 0 REGRET 1 Alternatives 2 Stocks 3 Bonds 4 Money Market 5 S 7 Outcomes Strong Average Weak 0 0 0 0 0 0 0 0 Minimax Maximum Choice 0 Best 0 Best 0 Best 0

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Question: PLEASE USE THIS FORMAT PROVIDED Debbie Gibson is considering three investment options for a small inheritance that she has just receivedstocks, bonds, and money market.

PLEASE USE THIS FORMAT PROVIDED

PLEASE USE THIS FORMAT PROVIDED Debbie Gibson is considering three investment

Debbie Gibson is considering three investment options for a small inheritance that she has just receivedstocks, bonds, and money market. The return on her investment will depend on the performance of the economy, which can be strong, average, or weak. The returns for each possible combination are shown in the following table:

Assume that Debbie will choose only one of the investment options.

(a) Which investment should Debbie choose if she uses the maximax criterion?
(b) Which investment should Debbie choose if she uses the maximin criterion?
(c) Which investment should Debbie choose if she uses the equally likely criterion?
(d) Which investment should Debbie choose if she uses the criterion of realism with?

Problem 8-16 Outcomes Strong Average Weak PAYOFFS Alternatives Stocks Bonds Money Market (a) Maximax Maximum Choice 0% Best 0% Best 0% Best (b) Maximin (c) Equally Likely Minimum Choice Average Choice 0% Best #DIV/0! #DIV/0! Best #DIV/0! #DIV/0! 0% Best #DIV/0! #DIV/0! (d) Hurwicz Realism Choice 0% Best Best 0% Best a = 0.5 0% 0% REGRET 1 Alternatives 2 Stocks 3 Bonds 4 Money Market 5 S 7 Outcomes Strong Average Weak 0% 0% 0% 0% 0% 0% 0% 0% Minimax Maximum Choice 0% Best 0% Best 0% Best 0%

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