a) The alternatives are to build a new store at a site nearby, expand the old one, or do nothing. Here are the regional economic

outlooks: a 65% chance that the economy will remain unchanged, a 25% probability of an upturn, and a 10% chanceof an

economic downturn. The following estimates of annual returns have been provided:

Market upturn (millions) Stable market (millions) Market downturn (millions)

Build new store 1.8 0.4 -0.3

Expand old store 1.6 0.6 -0.2

Do nothing 0.6 0.1 -0.25

Assume the goal is to maximize expected profit.

1. What should the company do?
2. What are the returns facing the company with this optimal decision?

b) Why is the regulation of insurance companies necessary? What is the FSC(Ja), and what is its role in the Jamaican insurance

industry?