Question
A survey recently reported that the mean national annual expenditure for inpatient and outpatient services of all persons over 64 years of age was $5,423
A survey recently reported that the mean national annual expenditure for inpatient and outpatient services of all persons over 64 years of age was $5,423 with a standard deviation of $979. A random sample of 352 persons over age 64 living in Nairobi had an average expense of $5,516. Can we conclude that the mean inpatient and outpatient expense of all Nairobi? residents over age 64 is higher than the national average of $5,423? Use the .01 level of significance. (9Marks) (b) An investor is considering three alternatives-a certificate of deposit, a low risk stock fund, and a high risk stock fund- for a $20,000 investment. The investor considers three possible states of nature S1: Strong stock market, S2: Moderate stock market, S3: Weak stock market The pay off table (in dollars) is as follows: Action States of nature Possible investment alternative S1 S2 S3 Certificate of deposit 1,200 1,200 1,200 Low- risk stock 4,300 1,200 -600 High-risk stock fund 6,600 800 -1500 (i) Which action is selected by the investor if he is a risk seeker? [2Marks] (ii) Which action is selected by the investor if he is a risk averter? [2Marks] (iii) Which criteria is selected by the minim ax regret criterion? [4Marks] (iv) Draw the decision tree for the investor's problem. [3Marks]
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