$2.$ You have gotten your dream job, which comes with the benefit of a $401($k$)$ plan. You are trying to figure out how to make your investments. The Presidential elections coming up have added to the uncertainty in the investment environment. You have done a fair bit of analysis and come up with the following payoff table, for the gain or loss on your investment of $$5,000$ after the next year.

Decisions

State of economy

Weak Economy Moderate Economy Strong Economy

Buy Bond Funds $$200$ $$200$ $$175$

Buy Stock Funds $-$$$1000$ $$300$ $$500$

a$.$ What are the states of nature in this situation?

b$.$ What are the decisions?

c$.$ Which of decisions or states of nature do you have control over?

d$.$ Suppose you are a conservative decision$-$maker. What criterion would you use in that case to make your decision?

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e$.$ Use your criterion in d$.$ to decide which action to take. Show your work to justify your answer.

f$.$ Suppose you are an optimistic decision$-$maker. What criterion would you use in that case to make your decision?

g$.$ Use your criterion in f$.$ to decide which action to take. Show your work to justify your answer.