Question (1): Answer the following questions:

a-Discuss the differences among decision making under certainty, decision making under risk, and decision making under uncertainty.

b-Drink Investment incorporated is investing money in stocks of companies producing drinks. It plans to invest 2 shares and 1 Government bond and maximize the portfolio's annual return. State the name of the application that should be used in the previous case. ( ___________________)

Question (2):Based on what you have studied decision analysis theory, solve the following problem:

State of Nature

Alternatives

Favorable

Unfavorable

Construct Large firm

400 000

-380 000

Construct Small firm

200 000

-40 000

Do nothing

0

0

Probabilities

0.5

0.5

From the table above, solve the following questions:

a)What is the criterion of realism? Use value of 0.8(4 Marks)

b)Develop an opportunity loss table and determine the mini-max regret decision.

(4 Marks)

c)Find the Expected Monetary value under risk with probability(0.5). (2 marks)