Question: Use Payoff Table 1 for Problems 1, 2, and 3. Decision Alternative High Meduim Low Aggressive Growth 250 100 25 Conservative Fund 100 100 75
Use Payoff Table 1 for Problems 1, 2, and 3.
Decision Alternative High Meduim Low
Aggressive Growth 250 100 25
Conservative Fund 100 100 75
1) Given the data in Payoff Table #1, answer the following:
- Construct a decision tree for this problem.
- If the you know nothing about the probabilities of the three states of nature, what is the recommended decision using the optimistic, conservative and minimax regret approaches?
- Interpret the findings.Is there a clear alternative?
2)Given the data in Payoff Table #1, you have learned the probabilities for the three states of nature are P(s1) = .65, P(s2) = .15 and P(s3) = .20.
- Construct the new decision tree with the probabilities.
- What is the expected value of each alternative result?
- What is the decision you would make?
- Calculate the expected value of perfect information.
- Comment on the results compared to the information from problem #1.
3)Given the data in Payoff Table number #1, you need to test the sensitivity of your results.To this you adjust the probabilities from problem #2 to the following.
- P(s1) = .60, P(s2) = .15 and P(s3) = .25.
- P(s1) = .70, P(s2) = .20 and P(s3) = .10.
- P(s1) = .65, P(s2) = .20 and P(s3) = .15
- P(s1) = .65, P(s2) = .10 and P(s3) = .25
Recalculate the expected values for each alternative.Does this change the results of your original decision?Explain your answers.
plzzz explain this in language...Thank you
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