In Problem 19.14, an investor is trying to determine the optimal investment decision among three investment opportunities. Prior to making his investment decision, the investor decides to consult with his financial adviser. In the past, when the economy has declined, the financial adviser has given a rosy forecast 20% of the time (with a gloomy forecast 80% of the time). When there has been no change in the economy, the financial adviser has given a rosy forecast 40% of the time. When there has been an expanding economy, the financial adviser has given a rosy forecast 70% of the time. The financial adviser in this case gives a gloomy forecast for the economy.

a. Revise the probabilities of the investor based on this economic forecast by the financial adviser.

b. Use these revised probabilities to repeat Problem 19.14.

c. Compare the results in (b) to those in Problem 19.14.